## Dun & Brad street DUNS Number : 145701699 Tax Identification Number: 14

- 1768979 Two Digit Congres sional District Code s : 20 and 21 

# Albany County Airport Authority Albany, New York

Proposal u nder the Small Community Air Service Development Program

Docket DOT

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- 0119Albany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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## TABLE OF CONTENTS

INTRODUCTORY LETTER

................................ ................................ ................................ .................... 4
AIRLINE LETTER OF SUPPORT

................................ ................................ ................................ ........... 6
EXECUTIVE SUMMARY

................................ ................................ ................................ ........................ 7
AIR SERVICE OVERVIEW

................................ ................................ ................................ ..................... 8
Catchment Area

................................ ................................ ................................ ................................ ..................... 8 Population within 30 and 60

- Minute Drives from the Airport

................................ ................................ .................. 9 Alternate Airports

................................ ................................ ................................ ................................ ................. 10 Albany's Existing Air Service

................................ ................................ ................................ ................................ 11 Air Service Development Efforts

................................ ................................ ................................ .......................... 13 

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

................................ ............................. 14 Capacity Trends

................................ ................................ ................................ ................................ ................... 14
Air Service Discontinued Sinc e 2000

................................ ................................ ................................ ................... 16
Traffic Trends

................................ ................................ ................................ ................................ ....................... 17 Leakage to Other Airports in the Region

................................ ................................ ................................ .............. 19
Domestic Fare Trends

................................ ................................ ................................ ................................ .......... 21 Albany's Domestic Fares Versus Domestic Fares at Other Airports in the Region

................................ ............. 23
Southwest's Aver age Albany Fare Versus Other Southwest Markets

................................ ................................ . 25 Fares in Albany's 30 Largest Domestic Markets Versus New York and Boston

................................ ................. 26
In ternational Traffic and Fare Trends

................................ ................................ ................................ ................... 27 Albany's International Fares Versus International Fares at Other Airports in the Region

................................ ... 28 

### STRATEGIC PLAN

................................ ................................ ................................ .............................. 30 Proposed New Route

................................ ................................ ................................ ................................ ........... 30
Goals

................................ ................................ ................................ ................................ ................................ .... 30 Target Airlin e Support

................................ ................................ ................................ ................................ .......... 30 Albany

– Houston Traffic and Fare Trends

................................ ................................ ................................ .......... 31 Connecting Traffic and Revenue on United Via Houston Intercontinental

................................ .......................... 37 Connecting Traffic and Revenue on Southwest Via Houston Hobby

................................ ................................ .. 39 Grant Amendments/Alternate Strategies

................................ ................................ ................................ ............. 41 

### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

................................ .......................... 42 Public / Private Partnerships

................................ ................................ ................................ ................................ 42
P roject Funding

................................ ................................ ................................ ................................ .................... 42 Implementation Timeline

................................ ................................ ................................ ................................ ...... 43Albany County Airport Authority; Albany, New York

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- Up Period and Sustainability of the Market

................................ ................................ ................................ . 43 

### PROJECT MONITORING AND FINANCIAL CONTROL

................................ ................................ ...... 44
Success Metrics

................................ ................................ ................................ ................................ ................... 44 Legal Sponsor

................................ ................................ ................................ ................................ ...................... 45
Financial Controls

................................ ................................ ................................ ................................ ................ 45 

### THE CAPITAL REGION'S ECONOMY

................................ ................................ ................................ . 46 Population and Demographi cs

................................ ................................ ................................ ............................. 46 Economic Development in Albany in the Capital Region

................................ ................................ ..................... 46 Largest Employers in the Capital Region

................................ ................................ ................................ ............. 48 Unemployment Rate

................................ ................................ ................................ ................................ ............ 49 

### APPENDIX A: REQUIRED SUMMARY INFORMATION

................................ ................................ ..... 50

A. Applicant Informat ion

................................ ................................ ................................ ................................ .... 50
B. Public/Private Partnerships

................................ ................................ ................................ .......................... 50
C. Project Proposal

................................ ................................ ................................ ................................ ........... 51
D. Existing Landing Aids at Local Airport

................................ ................................ ................................ .......... 51
E. Project Cost

................................ ................................ ................................ ................................ .................. 51
F. In

- Kind Contributions**

................................ ................................ ................................ ................................ . 52
G. Is this application subject to review by state under Executive Order 12372 Process?

................................ 52
H. Is this applicant delinquent on any federal debt?

................................ ................................ ......................... 52 

### APPENDIX B: LETTERS OF SUPPORT

................................ ................................ ............................. 53Albany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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### INTRODUCTORY LETTERAlbany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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### AIRLINE LETTER OF SUPPORTAlbany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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### EXECUTIVE SUMMARY

Albany International Airport is proposing a Small Communi ty Air Service Development Grant in the amount of $1, 5 0 0 ,000 to supplement a community

- based cash contribution of $250,0 00
, airport cash funding of $25,000

, community in

- kind contributions of $291,600 and airport in

- kind incentives valued at $481,908 to pr ovide a minimum revenue guarantee for service between Albany
and Houston Intercontinental on United Airlines (or a United regional affiliate) or Houston Hobby Airport on
Southwest Airlines.

The proposed service would provide Albany with service to not only a destination with a large base of local traffic, but also provide access to connecting markets in Texas
and other markets in the Southwest. Today, Albany has no nonstop service to any destination in Texas, but Dallas/Ft. Worth generates 59 passengers pe r day each way (PDEW), Houston generates 56 PDEW, Austin generates 29 PDEW and San Antonio generates 23 PDEW

– a total of 167 PDEW to Albany's four largest markets in Texas.

Because United already operates service from Albany to three of its other hubs, Ch icago, Newark and Washington Dulles, United already has a base of existing potential customers, the members in its frequent flyer program, in Albany. United's existing service in Albany also means United would not incur any start

- up expenses to begin serv ice in the market, and start

- up expenses are a major hurdle airlines face when they begin service in a market without an existing presence.

Like potential United service to Houston, Southwest service from Albany to Houston would also provide a new gateway for connections beyond Houston to other large Texas markets: Austin, San Antonio, Dallas/Ft. Worth, and the Rio Grande Valley. Like United, Southwest is an incumbent carrier at Albany, and Albany

- Houston service could easily be added to Southwest's existi ng schedule.Albany County Airport Authority; Albany, New York

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- 0119 8 Albany's capacity, measured in terms of seats per day each way, has declined 30.1% since capacity peaked in 2004, while domestic traffic has declined 19.8 % and the averag e domestic fare has increased 33.6% over the same period.

Although Alba ny is served by S out hwest Airlines
, a carrier known as a low

- cost carrier, Albany's average domestic fare is among the highest of the larger airpo rts in the Northeast. Interestingly, Southwest generates the highest fare in its network in Albany.

Albany International Airport is the primary airport in a catchment area that includes Albany and a large geographic region of Upstate New York

. Albany is the state capital of New York, and the metropolitan sta tistical area (MSA)
is the fourth largest MSA in New York with a pop ulation of 857,592 residents (New York City, Buffalo and Rochester are larger).

Albany's economy is among the strongest in the region, with an unemployment rate of just 6.8% in May 2011, compared to a national unemployment rate of 9.1% and a New York statewide average of 7.8%. Albany's May 2011 unemployment rate was the second lowest of the 12 MSAs in New York tracked by the Bureau of Labor
Statistics.

Albany's economy is positioned to grow rapidly beginning i n early 2012 when G L O B A L F O U N D A R I E S opens a 1.3 million square foot semiconductor manufacturing facility just north of Albany. The new facility will spur economic activity as vendors build facilities and employees move i n to the region to sup ply and suppo rt G L O B A L F O U N D A R I E S . Business tra vel between Albany and destinations such as Austin and the Silicon Valley is expected to increase dramatically once the facility is open.



### AIR SERVICE OVERVIEW

Catchment Area

The 2009 Censu s Bureau estimate of the Albany

- Schenect ady

- Troy metropolitan stat istical area is 858,000 thousand residents (an estimate based on the 2010 census is not yet available ), t he population of the metropolitan statistical area grew from 827,000 residents in the ten years since 2000. The metropolitan statistical
area is consi dered the primary catchment area for Albany International Airport.Albany County Airport Authority; Albany, New York

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### Population within 30 and 60

- Minute Drives from the Airport

620,000 residents live within a 30 minute drive of Albany International Airport and nearly 1.2 million residents live
within a one hour drive of the airport

– an area that includes more than just the metropolitan statistical area.

Exhibit 1: 30 and 60

- minute drive times from Albany International AirportAlbany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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### Alternate Airports

Albany International Airport is the closest Airport to residents within a one hour drive of the airport, and no other airport is within a two hour drive of Albany. Syracuse, Hartford and Newburgh are within two to three hours of Albany, while LaGuardia, Newark, Kennedy, Boston, Providence, and Manchester jus t outside the three hour perimeter from Albany. Leakage to each of these airports is addressed later in this proposal.

Exhibit 2 : Location of Albany International Airport , One, Two and Three Hour Drive Times from Albany International Airport and the Loca tions of Other Airports in the RegionAlbany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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### Albany' s Existing Air Service

Albany is served by seven airlines

– Air Canada, Cape Air, Delta, Southwest, United (and Continental) and US Airways to 24 nonstop destinations. With the exception of three EAS marke ts in New York and three destinations in Florida served by Southwest, all of Albany's service is to major airline hubs or focus cities. Although Albany has service to Chicago, Minneapolis/St. Paul and Las Vegas, most of Albany 's service is East Coast

- cent ric. Albany had no nonstop service to the major hubs in Houston, Dallas/Ft. Worth , Phoenix or Denver, an d travel to destinations in the West, the Southwest and in Mexico , especially smaller markets, can be difficult with many destinations requiring double connections from Albany.

Exhibit 3 : Current Routes Operated from Albany International AirportAlbany County Airport Authority; Albany, New York

Proposal Under the Small Community Air Service Development Program; Docket DOT

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- 0119 12 The number of departures per day, average seats per departure and seats per day by market and by carrier are displayed in Exhibit 4. With 37.1% of total c apacity, Southwest operates more capacity at Albany than any other carrier. United/Continental operates 22.8% of the capacity, and US Airways is the third largest carrier in terms of capacity, with 21.4%. Collectively, the three hubs and focus cities wit h a western focus, Chicago, Minneapolis and Las Vegas account for just 19.5% of Albany's capacity.

Exhibit 4: Departures per Day *
, Seats per Depart ure and Seats pe r Day by Market and Carrier at Albany

– September 2011

* T he number of departures per d ay is displayed in increments of sevenths (because there are seven days in a week) . "1 5/7" is read as one flight seven days a week with a second flight operated five of the seven days in a week.Albany County Airport Authority; Albany, New York

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### Air Service Development Efforts

Albany International Ai rport is aggressively pursuing new air service an d has met with 12 airlines in 16 me etings over the past 15 months. Albany has met with four airlines at their headqu arters offices and attended both the JumpStart and Network USA air service conference s in 2011. The most successful effort thus far was a May 2010 meeting with Delta Air Lines at Delta's headquarters in Atlanta. Airport officials met with Delta Route and Schedule Planning management at Delta's headquarters in Atlanta to provide an overview of Albany's economy and present a business case for additional capacity to Atlanta. Shortly after the meeting, Delta announced it would increase capacity in the Atlanta market by substituting mainline aircraft on two of the three flights operated
with 70

- se at regional jets. Albany's meetings with airlin es are illustrated in Exhibit 5 :

Exhibit 5 : Albany International Airport Air Service Development Meetings with Airlines

– May 2010 through July 2011Albany County Airport Authority; Albany, New York

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### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

Capaci t y Trend s

Albany's total capacity, measured in terms of seats per d ay each way, is down 30.7% since 2004. Albany has lost nearly half of its ex

- Southwest capacity, which is down nearly 46.4%. W hile Southwe st's capacity increased 30.9% since 2004, nearly half of Southwest's growth was in the Tampa and Orlando markets

– markets that do not generate significant connecting traffic to the rest of Southwest's network.

Exhibit 6: Seats per Day Ea ch Way at Albany International Airport (All Carriers , Ex

- Southwes t and Southwest) Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 15 Exhibit 7 illustrates all ex

- Southwest carriers have reduced capacity at Albany since 2004. American Airlines exited the Albany market entirely when it discontinued American Eagle service to Chicago, combined Delta and Northwest capacity is down 52.5%, US Airways capacity is down 42.3%, combined United and Continental capacity is down 28.3% and Independence Air filed for bankruptc y and discontinued all operations.

Exhibit 7 : Seats per Day E ach Way by Carrier (Excludes Cape Air ) at Albany International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 data)

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### Air Service Discontinued Si nce 2000

S ince 2000
, Albany has lost service in 21 markets including service to hubs or focus cities such as Boston (American), New York JFK (American), Pittsburg (US Airways), Chicago (American) and Cincin nati (Delta). American's exit from the Albany ma kes Albany one of the largest commercial air service markets in the U.S.
without an American or oneworld Alliance presence.

Exhibit 8 : Albany Service Discontinued Since 2000 by Year, Carrier and DestinationAlbany County Airport Authority; Albany, New York

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### Traffic Trend

s

While Albany's capacity pea ked in 2004, traffic peaked in 2005 at approximately 3,059,000 annual origin and destination (O&D) passengers. Ex

- Southwest domestic and international traffic was higher in 2004 than 2005,
but an increase in Southwest traffic from 2004 to 2005 boosted Alb any's total traffic to a peak in 2005. Since 2005, Albany's total traffic is down 19.7%, with ex

- Southwest domestic traffic down 37.8%, international traffic down 5.2% and Southwest traffic up 24.5%.

Exhibit 9 : Annual D omestic and International Origin and Destination (O&D) Passengers at Albany International Airport Year

- End Fourth Quarter 2001

- 2010 ( DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 18 When Albany's annual O&D data is translated to passengers pe r day each way (PDEW), total traffic is do wn 813
PDEW from 4,179 PDEW in 2005 to 3,366 PDEW in 2010. E x - Southwest domestic traffic is down 1,081 PDEW from 2,871 PDEW in 2005 to 1,789 PDEW in 2010; international traffic is down 9 PDEW from 190 PDEW in 2005
to 181 PDEW in 2010 and Southwest traffic is up 278 PDEW from 1,118 PDEW in 2005 to 1,396 in 2010.

Exhibit 10 : Annual Domestic and International Passengers per Day Each Way (PDEW) at Albany International Airport Year

- End Fourth Quarter 2001

- 2010 (DB1B data)Albany County Airport Authority; Albany, New York

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### Leakage to Other Airports in the Region

Despite the fact no other airport with commercial service is located within a two hour drive of Albany, Albany International Airport captures only 52.8% of the traffic generated in its primary catchment area ( defined as the Albany metropolitan sta tistical area) ; 47.2% of the traffic generated in Albany 's catchment area leaks to other airports in the region. Collectively, the three primary airports serving New York City capture 30.5% of the traffic generated in Albany's primary catchment area

. LaG ua rdia captures 18.8%, JFK captures, 6.5%, and Newark captures 5.2% of the traffic. The other major beneficiary of traffic leaked from Albany is Boston, which captures
7.4% the traffic. Analysis of the leakage data by domestic and international itinerar ies indicates Newark and JFK captured higher percentages of international traffic relative to domestic traffic among the airports analyzed.

Exhibit 11 : Airport Origin for Albany Catchment Area Traffic April 2009

– March 2010 (October 2010 Leakage Study)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 20 The high percentage of traffic leaked to other airports in th e region seems surprising, especially given Southwest 's presence in Albany. A nalysis of the leakage study data indicates average fares paid at Albany and av erage fares paid by travelers leakin g to the other airports show s leaked traffic generally paid less to travel from the other airports. Based on ticket samples for travel between April 2009 and May 2010, Albany

- area travelers flying from Albany Inter natio nal Airport paid $173 each way versus just $133 when flying LaGuardia Airport and $144 when flying from Hartford. The average fare paid at LaGuardia was 23.1% lower, and the average fare paid at Hartford
was 16.7% lower than the average fare paid for trav elers flying from Albany.

Exhibit 12 : A verage Fare Paid by Albany Catchment Area Passengers by Originating Airport

– April 2009 through March 2010Albany County Airport Authority; Albany, New York

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### Domestic Fare Trend

s

As airlines have cut capacity in Albany since 2005, fares have increased. Since A lbany's capacit y peaked in 2004 at 6,459 seats per day each way, the average domestic fare for all domestic traffic , including Southwest traffic,
increased $44 each way or 33.6% to $175 each way. This increase came as Albany's capacity f ell 30.7% and
traf fic fell 19.8%.

Exhibit 13 : Passengers per Day Each Way (PDEW), Seats per Day Each Way and Average Domestic One

- Way Fare at Albany International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 22 While the average domestic fare for all carriers serving Albany increased 33.6% from $131 to $175 since 2004, there are significant differences in domestic far e increases when Southwest fare data is segregated from ex

Southwest domestic fare data. The ave rage ex
- Southwest domestic fare has increased 37.6% from $142 to $195 since 2004; Southwes t' s average fare increased even more

– 54.7%

– from $96 to $149 since 2004. While Southwest's average Albany fare was lower than the average domestic ex

- Southwest fa re in 2010, Southwest's fare has increased at a greater rate than the average domestic ex

- Southwest fare.

Exhibit 14 : Average One

- Way Domestic Fare at Albany International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

100 and DB1B data)

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### Albany's Domestic Fares Versus Domestic Fares at Other Airports in the Region

In 2010, Albany's average domestic one

- way fare of $175 was the third highest among larger airports in the
Northeast. O nly Newark and JFK had higher d omestic fares, while Hartford, Syracuse, Boston New York LaGuardia, Providence, Newburgh, Allentown, Manchester, Rochester, White Pla ins and Buffalo had lower fares than Albany (Exhibit 12 ).

Exhibit 15 : Average Domestic Fare at Albany and Larger Airports in the Northeast

– Year

- End Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 24 Not only did Albany have one of the highest domestic fares among larger peer group airports in the Northeast in 2010, but Albany's domestic fare increased by the greatest rate among the largest airports in the region. Albany's average domestic fare increased 33.6% between 2004 and 2010 as Albany's average fare increased from $131 to $175. Three airports in Albany's peer group actually experienced declines in domestic fares between 2004 and 2010. Domestic fares declined at Newburgh, Allent own and White Plains (Exhibit 16 ).

Exhibit 16 : Change in Average Domestic Fare at Albany and Larger Airports in the Northeast

– 2010 Versus 2004 (DB1B data)Albany County Airport Authority; Albany, New York

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### South west 's Average Albany Far e Versus Other Southwest Markets

As previously illustrated in Exhibit 14 , Southwest's average one

- way fare in Albany in 2010 was $149, or $298 roundtrip. Comparing Southwest's average Albany fare to other markets across the Unite d States served by Southwest reveals Albany produced the highest fare in Southwest's network (Exhibit 17 )

. While Southwest's average fare of $149 in 2010 was lower than Albany's average ex
- Southwest domestic fare of $195 and helped bring the average dome stic fare in Albany down to $175, and Southwest is considered a low

cost carrier, Albany's average domestic fare was the highest among airports in the Northeast as illustrated in
Exhibit 1 5

.
Exhibit 17 : Average Southwest Airlines Fare s at the 25 Highest Southwest Fare Airports

– Y ear
- End Fourth Quarter 2000

- 2010 ( DB1B data)Albany County Airport Authority; Albany, New York

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### Fares in Albany's 30 Largest Domestic Markets Versus New York and Boston

A nalysis of 2010 average fares in Albany's 30 largest domestic markets
, relative to the three primary ai rports in New York City and to Hartford
, reveals Albany has a lower fare in only two market s

– Dallas/Ft. Worth and
Nashville. In the other 28 markets, Albany's average fare is higher, with an average difference of $ 30 each way, or $60 roundt rip . Somewha t surprisingly, JFK had the lowest fare in 15 of Albany's 30 largest markets, La Guardia
had the lowest fare in 11 markets and Boston had the lowest fare in 4 markets ( JFK and Boston tied for the lowest fare in Jacksonville, and JFK and LaGuardia tied for t he lowest Austin fare at $171). Analysis of Albany's fares versus the New York airports and Boston helps explain why 30.5% of the traffic generated in Albany's catchment

area leaks to the New York airports and why 7.4% of the traffic leaks to Boston

– far es are almost always lower at one the three primary airports serving New York City or at Boston.

Exhib it 14 : PDEW and Average One

- Way Fare in Albany 's 30 Largest Markets Versus Average Fare s at Hartford and the Three Primary New York Area Airports

– Year

- End Fourth Quarter 2010 (DB1B data)Albany County Airport Authority; Albany, New York

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### International Traffic and Fare Trends

Albany's international traffic stood at 181 PDEW in 2010, an increase of 8.1% over 2009. Interestingly, the average international fare also increased $66 each way, or 13.5%, to $ 548. Higher traffic and a higher average fare speak to the resilience of interna tional demand in the Albany market; typically traffic would decline as the average fare increases.

Exhibit 13 : International Passengers per Day Each Way (PDEW), and Average Domestic One

- Way Fare at Albany International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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### Albany's International Fares Versus International Fares at Other Airports in the Region

Albany's av erage international fare, at $548 each way, was the second highest among the larger airports in the region. Only Allentown, with an average fare of $595 had a higher average international fare than Albany. Each of the three primary New York City airports had lower fares; the average Newark fare was $480, the average JFK fare was $455, and LaGuardia's average international fare was $337.

Exhibit 15: Average International Fare at Albany and Larger Airports in the Northeast

– Year

- End Fourth Quarter 2010 (D B1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 29 Like domestic fare growth among the larger airports in the region between 2004 and 2010 (as illustrated in Exhibit 16), Albany's international fare growth also grew at a faster rate than any of the othe r larger airports in the region. Albany's average international fare increased 35.3% between 2004 and 2010.

Exhibit 16 : Change in Average International Fare at Albany and Larger Airports in the Northeast

– 2010 Versus 2004 (DB1B data)Albany County Airport Authority; Albany, New York

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### STRATEGIC PLAN

Proposed New Route

Albany International Airport is proposing a Small Community Air Service Development Grant to provide a minimum revenue guarantee for service between Albany and Houston Intercontinental on United Airlines (or a United regional affi liate) or Houston Hobby Airport on Southwest Airlines. The proposed service would provide Albany with service to not only a destination with a large base of local traffic, but also provide access to connecting markets in Texas and other markets in the Sout hwest. Today, Albany has no nonstop service to any destination in Texas, but Dallas/Ft. Worth generates 59 passengers per day each way (PDEW), Houston generates 56 PDEW, Austin generates 29 PDEW and San Antonio generates 23 PDEW

– a total of 167 PDEW to
A lbany's four largest markets in Texas.



### Goals

Albany has four goals with its Small Community Air Service Development Grant proposal for service to Houston

 Better access to Houston and the connecting markets served via Houston, particularly connecting
marke ts in Texas such as Austin, Dallas/Ft. Worth, San Antonio and the Rio Grande Valley.

 Lower fares in the Houston market and the largest connecting markets beyond Houston.

 Reverse the decline in Albany 's origin and destination traffic

.

 Recapture catchment ar ea traffic leaked to other airports



### Target Airline Support

United Airlines has w r i t t e n a l e t t e r o f s u p p o r t o f t h e p r o p o s e d s e r v i c e

. I t i s a t t a c h e d o n p a g e 6

.Albany County Airport Authority; Albany, New York

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### Albany

– Houston Traffic and Fare Trends

The combined Albany

- Houston Intercontinental and Houston Hobby market size stood at 5 6.2 PDEW in 2010. Although Albany's airline capacity and traffic has been trending down since 2004, the Albany

- Houston market size actually increased slightly since 2004, even as the average one

- way fare increased from $158 in 2004 to $187 in
2010. The resilience of the Albany

- Houston market size in an environmen t where Albany's capacity and total
domestic traffic has trended down , coupled with higher Albany

- Houston fares are strong indicators of inherent
dema nd in the Albany

- Houston market. The introdu ction of nonstop Albany

- Houston service would further stimulate demand in the market and likely put downward pressure on not only Albany

- Houston fares, but also put downward pressure on fares in the connecting markets via Houston.

Exhibit 17 : Albany

– Hou ston (IAH and HOU) Passengers per Day Each Way ( PDEW )

– Year

- End Fourth Quarter ( DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 32 Among the two airports in Houston, Intercontinental generated slightly more than 60% of the traffic and Hobby generated sl ightly less than 40% of the traffic. In 2010, Albany

- Houston Intercontinental generated 34.6 PDEW, and Albany

- Houston Hobby generated 21.7 PDEW. While total Albany

- Houston traffic has been essentially flat over the past four years, traffic to Interconti nental has declined while traffic to Hobby has increased.

Exhibit 18 : Albany

– Houston (IAH and HOU) Passengers per Day Each Way (PDEW) by Airport

– Year

- End Fourth Quarter (DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 33 The average Albany

- Houston one
- way fare was $187 in 2010

– up 18.1% since its low point over the last 11
years of $158 in 2004 . Although the average Intercontinental fare of $199 was higher than the average Hobby fare of $168 in 2010, the fare s to both airports are up similar amounts since the low point in 2004

– 17.2% for Intercontinental and 19.2% for Hobby.

Exhibit 19 : Albany

– Houston (IAH and HOU ) Average One

- Way Fare by Airport

– Year

- End Fourth Quarter (DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 34 The chart in Exhibit 20 illustrates the relationship between Albany

- Houston traffic and the average one

- way fare in
annual increments between 2000 and 2010 and illustrates traffic has remained strong despite increasingly higher
fares. The chart on the next page in Exhibit 21 illustrates the relations hip of Albany

- Houston traffic and fares in quarterly increments over the last two y ears between fourth quarter 2008 and fourth quarter 2010. This q uarterly
data helps solidify the strength of the demand in the Albany

- Houston mark et. Traffic increased from 49.8 PDEW in fourth quarter 2009 to 56.5 PDEW in fourth quarter 2010, an increase of 13.4%. The higher fourth quarter
traffic came even as the fare increased 6.4%. In third quarter 2010, t raffic increased to 71.0 PDEW from 64. 6 PDEW in third quarter 2009 an increase of 9.8 % , despite the fare increasing 7.4%

.

Exhibit 20 : Albany

– Houston ( IAH and HOU ) PDEW and Average Fare

– Fourth Quarter 2008 through Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 35 Ho uston ranks as Albany's 16th largest market with 41,040 origin and destination passengers, or 56.2 PDEW in
2010.

Exhibit 21 : Origin and Destination Passengers and PDEW in Albany's 30 Largest Domestic Markets

– Year

- End Fourth Quarter 2010 (DB1B data)

Th is Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 36 From Houston's perspective, Albany is the 67th largest domestic Houston market when ranked by passengers per day each way , and is the fourth largest Houston market without nonstop service on any carrier. Among markets

w ithout nonstop service to Houston, only Buffalo, Hartford, and Providence are larger. Although these three markets are larger than the Houston

- Albany market, Albany generated the hi ghest average one

- way fare and the highest yield. The higher yiel d and fa res should provide Albany with somewhat of an advantage when new markets are evaluated by United and Southwest for service from Houston.

Exhibit 22 : Houston (IAH and HOU) Domestic PDEW , Yield, Rev enue per Day Each Way, Distance and Nonstop Service Indic at ion

– (Markets Ranked by PDEW with #50 through #75 illustrated)

– Year

- End Fourth Quarter 2010 Data ( DB1B data)Albany County Airport Authority; Albany, New York

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### Connecting T

raffic and Revenue on United Via Houston Intercontinental

Taking a conservative approach to the circuity of connections via Ho uston , s ervice on United from Albany to Houston could connect with at least 81 airports United serves from its hub at Houston Intercontinental. The
connect markets on United via Intercontinental are centered alon g the U.S. Gulf Coast, Texas, the Southwest
, Southern California, Mexico and other markets in Central America.

Exhibit 23 : Non

- Circuitous Markets United Could Serve with Albany

– Houston Intercontinental Service

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- 0119 38 The 30 largest markets United could serve with Albany

– Houston Intercontinental service generated 638.9
PDEW at an average one
- way fa re of $201 in 2010 ; all markets United could serve via Houston generated 653.3 PDEW at an average fare of $204 in 2010. The size of the local market, plus the cu mulative size of connecting
markets via Houston Intercontinental at the high average fare s should make Albany

– Houston an attractive opportun ity for United

.

Exhibit 24 : Passengers per Day Each Way (PDEW) and Average One

- Way Fares in the 30 Largest Ma rkets United Could Serve with Albany

– Houston Intercontinental Service

– Year

- End Fourth Quarter 2010 ( DB1B data)Albany County Airport Authority; Albany, New York

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### Connecting T

raffic and Revenue on Southwest Via Houston Hobby

Although the number of markets Southwest could serve with Albany

- Houston Hobby service is more limited than the number of markets United could serve via Intercontinental, Southwest c ould serve 16 markets from Hobby, and these markets generated 575.9 PDEW at an average one

- way fare of $195 in 2010. While potential
Southwest Alb any
- Houston service would generate less potential traffic via its operations at Hobby versus United's hub at Intercontinental, Southwest 's could still serve markets accounting for 88.2% of the traffic United
could flow via Intercontinental.

Exhibit 25 : Non

- Circuitous Markets Southwest Could Serve with Albany

– Houston Hobby Service

This Section Continued on Next PageAlbany County Airport Authority; Albany, New York

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- 0119 40 The 17 markets Southwest could flow from Albany via Houston Hobby generated a total of 575.9 PDEW in 2010 at an average fare of $195. A s previously illustrated in Exhibit 14 , Southwest's average fare in Albany in 2010 was $149, so the average fare of the markets Southwest could flow via Houston should be appealing to
Southwest.

Exhibit 26 : Passengers per Day Each Way (PDEW) and Averag e One

- Way Fares in the 30 Largest Markets Southwest Could Serve with Albany

– Houston Hobby Service

– Year

- End Fourth Quarter 2010 (DB1B data)Albany County Airport Authority; Albany, New York

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### Grant Amendments/

Alternate Strategies

Albany's primary air service development goal is for new service to a hub in the Southwest or West. This goal is
a function of high

- tech industry economic growth in Albany International Ai rport's primary catchment area. The community believes new nonstop service to a hub in the Southwest or West would further enhance th e community's ability to grow high

- tech economic activity by improving ease of access to other regions in the U.S. with high concentrations of high

- tech economic activity such as Houston, Austin, Dallas/Ft. Worth and various
markets in California.

If the Department awards Albany a grant for service to Houston, but the community is not successful in recruiting a carrier to operate Albany

- Houston service, the community may request the Department consider redirect ing award funding to assist in recruiting ser vice from Albany to Dallas/Ft. Worth on American, Denver on United, Southwest or Frontier, San Francisco on United, Southwest or Virgin America or an airport in the Los Angeles
basin on Unit ed, Southwest , JetBlue or Virgin America, depending on airline int erest in serving these markets from Albany.

I f a carrier that does not currently serve Albany begins service in Albany, the Airport's in

- kind incentives increase from $481,908 to nearly $1.5 million over two years (this proposal for service to Houston on U nited or Southwest is valued at $481,908 because United and Southwest are incumbent carriers). Airlines such as American, JetBlue, Virgin America and Frontier would qualify for the higher incentive.Albany County Airport Authority; Albany, New York

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### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

Publ ic / Private Partnerships

The Capital Region's support for additional air service
, and for Albany

- Houston service in particular
, is broad and
includes five primary organizations (in addition to Albany International Airport) representing over 7,000 employe rs in the Capital Region.

 Center for Economic Growth

 Albany

- Colonie Regional Chamber of Commerce

 The Chamber of Schenectady County

 Rensselaer County Chamber

 Saratoga County Chamber 

### Project Funding

In addition to the Small Community Air Servi ce Developmen t Grant of $1,5 00,000 requested from the Department, organizations in the community are willing to prov ide cash of $ 250,0 00 and in

- kind funding valued at $291,600 for local media company advertising placement . The A irport will provide cash of $25,000 for marketing
and estimates the value of its in

- kind contributions from waive d fees at $481,908 over the two

- year life of the project . The total value of cash and in

- kind contributions from the community and the airport is valued at $1,018,5 08 or 41.1 % of th e total project cost of $2,54 8,5 08

.

Exhibit 27 : Summary of Sources and Types of Project Funding

.Albany County Airport Authority; Albany, New York

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### Implementation Timeline

The proposed implementation timeline for the project assumes the Department will award Small Communit y Grant Funding sometime i n September 2011 . Once the award is announced
, Albany International Airport will begin discussions with United to begin service. Based on airline planning lead times and the need for advance bookings, we assume United would not be able to begin service u ntil sometime in 2012, and we have conservatively assumed the se rvice could not begin until September 2012 . The first two milestones on the Airport's timel ine are to execute the grant agree ment with the Department and to negotiate the minimum revenue
guar antee agreement with United. Once service is announced and schedules are published, United, the Airport and the community would begin marketing the new route and working with United to monitor advance bookings. The Airport will continue its marketing pro gram and continue to work with United to monitor the route once service begins. The Airport will submit grant status reports on a quarterly basis to the Department throughout the proposed two year term of the minimum revenue guarantee.

Exhibit 28 : Propos ed Project Timeline



### Start

- Up Period and Sustainability of the Market

The Airport will aggressively market the new service to busin ess and leisure travelers in Albany's immediate
catchment area. The Albany

- Houston market size peaked in the third and fo urth quarter in each of the last two
year s, so a start date in September would enable United to start service at a time of the year when demand for the service is at its strongest point in the year. A minimum revenue guarantee is an effective use of SCASD funding because a guarantee reduces an airline's risk in the start

- up phase of a market's maturity while traffic in
the new market increases ; a period of time that is often subject to losses. The size of the local Albany

- HoustonAlbany County Airport Authority; Albany, New York

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- 0119 44 market, while large, will increase with the introduction of nonstop service and the connecting traffic that could flow via Houston to other destinations will complement the local Albany

- Houston traffic.



### PROJECT MONITORING AND FINANCIAL CONTROL
Success Metrics

The s u ccess of th e p rogra m will be based on achieving the objectives of the program . The Airport will continuously monitor the performance of the route. Even before service begins we will communicate with United on a weekly basis to monitor advance bookings and week

- over
- we ek of advance bookings. Marketing and promotional activities can be adjusted if advance bookings are weak or are not booking at a rate (the advance booked load factor, or ABK) c omparable to other United Houston markets.

Project Goals Success Metric

 Bette r access to Houston and the connecting markets served via Houston, particularly connecting markets in Texas such as Austin, Dallas/Ft. Worth, San Antonio and the Rio Grande Valley.  Albany

- Houston market size growth and market size growth in the markets tha t could connect to markets beyond Houston.

 Lower fares in the Houston market and the largest connecting markets beyond Houston.  Quarterly year

- over
- year declines in fares for the local Albany

- Houston market and the largest markets beyond Houston

.
 Reverse the decline in Albany 's origin and destination traffic

.  Increased quarterly year

- over
- year origin and destination traffic

.
 Recapture catchment area traffic leaked to other airports

.  Less leakage in the local Houston market and market connecting beyond Ho uston

.
Once service begins, the Airport will rely on traffic and revenue data provided directly by the airline and the amount of reimbursements requested by the airline as indications of project success. T

- 100 data and DB1B data will also be analyzed to compare year
- over
- year market size growth on a quarterly basis. In addition, the airport will analyze leakage once the service has operated for a full year to determine the trend in leakage to other airports. The Airport will report its success metrics i n the quarterly grant reports to the Department.Albany County Airport Authority; Albany, New York

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### Legal Sponsor

Albany County Airport Authority is the legal sponsor responsible for administering the program. Albany County Airport Authority is a government entity.

Albany County Airport Authority

Alba ny International Airport
Administration Building

Suite 200
Albany , NY 12211

- 1057

John A. O'Donnell , PE

Chief Executive Officer

518

- 242

- 2222 (office)


### Financial Controls

As the sponsor, Albany County Airport Authority and its governing body, Albany County A irport Authority Board
, will be the responsible partie s for all fiscal matters and the Department's reporti ng requirements. The Airport Authority Board is established as a public governing body. As a public entity
, the Department can be assured that
prop er financial controls are in place to guarantee that the Department ’s Grant will be used in accordance with any subsequent agreement. The Albany Count Airport Authority Board understands that the Grant is a reimbursable grant, meaning the Airport is respo nsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request.Albany County Airport Authority; Albany, New York

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### THE CAPITAL REGION'S ECONOMY Population and Demographics

The latest estimate of the Albany

- Schenectady

- Troy metropolitan statistical area is nearly 857,592 residents with a medium household income of $52,971. Since 2000, the population of the MSA has grown 3.7% while household income has grown 24.8% over the same period


### Economic Development in Albany in the Ca pital Region

The Albany and the Capital Region have a long history of innovation dating back over 150 years. With such iconic companies as General El ectric and IBM, Albany has also enjoyed a reputation as a manufacturing center. Unfortunately, the globali zation of the world econom y over the past few decades eroded the region's
manufact uring base. In the wake of manufacturing sector job losses and the shifting economy, government leaders, academia and the private sector came togethe r at the end of the 1990 s and recognized t hat a paradigm shift was needed for the region's economy to move forward and grow.

Over time, this partnership of interests focused on high value technology industries that could drive economic growth into the next century. Towards this e nd, National Grid funded a joint study between the Center for Economic Growth ( CEG ) and the Lally School of Business at the Rensselaer Polytechnic Institute. This study identified five key industries (since expanded to six) as viable, next generation oppor tunitie s for the region in and around Albany to include:

 Nanotechnology and Semiconductors

 Advanced Materials

 Information Technology

 Bio/Life Sciences

 Renewable Energy

 Homeland Security and Defense

Propelled by successes such as SUNY’s College of Nanoscal e Science & Engineering and GLOBALFOUNDRIES semiconductor manufacturing facility, CEG continues to create an environment capable of sustaining an innovation based economy.

GLOBALFOUNDRIES' microchip fabrication facility, when it opens in 2012, is expected to create 1,400 new direct jobs and at least 5,000 indirect jobs in the Capital Region.Albany County Airport Authority; Albany, New York

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- 0119 47 GLOBALFOUNDRIES does contract manufacturing for other chip companies and is a spin

- off of Advanced Micro Devices. The average salary among GLOBALFOUNDRIES employees is expected to be $60,000 when the facility opens, and this compares to an average salary of $46,250 among all workers in Albany and the Capital Region.

In addition to the Capital Region's increasing nanotechnology and semiconductor

- related economic growt h, the number of green technology and clean energy jobs is increasing. At 6.3% of the workforce, the Capital Region has the largest percentage of total workers in the United States working in green technology industries according to a July 2011 report by the Brookings Institution. Only the San Francisco Bay Area, with 13,917 workers in green technology and clean energy has more workers than the Capital Region's 10,092 workers in the field. Albany is one of only four metropolitan areas in the U.S. contrib uting more than $1 billion annually from green technology industries (Los Angeles, San Francisco and New York City are the others). The highest concentration of the Capital Region's green jobs are in the fuel cell, wind power generation and the profession al energy services industry sectors. General Electric's renewable energy headquarters was recently located in Schenectady and employs 650 workers in this office. GE also recently opened a state

- of

- the

- art battery manufacturing facility employing 350 work ers at its renewable energy campus in Schenectady.

In its 2010 Best

- Performing Cities Index, the Milken Institute ranked Albany as the 41st best

- performing city (the 79th percentile) among the 200 largest metropolitan statistical areas in the United State s for job, wage and salary growth and high

- tech domestic product growth between 2006 and 2010. Albany ranked as the 15th best large city for

one
- year job grown between 2008 and 2009 and ranked 22nd for one

year wage and salary growth between 2008 and 2009 in the Milken Institute's 2010 Report. Because the index is based on several factors, including both one

- year and five year job and wage and salary growth, these rankings are expected increase once the GLOBALFOUNDRIES facility opens and the Capital Regio n's five

- year job and wage growth ranks higher. The job and wage growth will result from the direct job growth at the GLOBALFOUNDRIES facilities and the indirect job growth at vendors and suppliers to the GLOBALFOUNDRIES facility.

Interesterly, five of t he top 10 metro areas in the Milken Institute's 2010 Best

- Performing Cities are in Texas (#1 Killeen, #2 Austin, #4 McAllen, #9 El Paso and #10 Houston), and nonstop Albany

- Houston service would improve the connectivity between Albany's economy and these e conomies in Texas.Albany County Airport Authority; Albany, New York

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### Largest Employers in the Capital Region

As the state capital, the State of New York is the largest employer in the Capital Region, and the U.S. Government is the second largest employer in the region. Albany Medical Center, Golub Cor poration and
General Electric round

- out the five largest employers. Because it is not yet open, the GLOBALFOUNDRIES facility does not have a sufficient number of employees to be included on the list of largest employees, b ut with 1,400 projected employer s , GLOB ALFOUNDRIES would rank as the 25 th largest employer on this year's list of largest employers in the Capital Region.

Exhibit 29 : Albany and Capital Region Employers with at Least 1,000 Employees (Capital District Business Review, Book of Lists 2010)Albany County Airport Authority; Albany, New York

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### Unemployment Rate

The robust economic development projects in the Capital Region translates to a relatively low unemployment rate. In April 2011, the latest month for which unemployment data is available at the MSA level, Albany's unemployment rate was just 6.8%, compared to 9.1% for the U.S. average and 7.8% for all of New York. Among the largest MSAs in the Northeast surrounding Albany, only Manchester and Boston had lower unemployment rates in April 2011. Rochester, Poughkeepsie, Buffalo, Syracuse, New York City and Hartford each had a higher unemployment rate than Albany.

Exhibit 30 : April 2011 Unemployment Rates

– U.S. Average, New York Statewide, Albany and the Largest MSAs in the Region Surrounding Albany (U.S. Bureau of Labor Statistics)Albany County Airport Authority; Albany, New York

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### APPENDIX A: REQUIRED SUMMARY INFORMATION

A. Applicant Information

Not a Consortium

Interstate Consortium

Intrastate Consortium
Community now receives EAS subsidy
Community (or Consortium member) previously received a Small Community Grant
If previous recipient: Date of Grant: ____________________ Expiration Date of Grant: ____________________



### B. Public/Private Partnerships

Public

1. Albany County Airport Author ity 2. Center for Economic Growth 3. Albany

- Colonie Regional Chamber of Commerce 4. The Chamber of Schenectady County 5. Rensselaer County Chamber 6. Saratoga County Chamber

Private (i ncludes 13 partners pledging at least $3,500; 11 others have pledged at least $2,500)

1. AFCO AvPorts Management, LLC 2. C.T. Male Associates, P.C. 3. Callanan Industries, Inc. 4. Capital District Physicians Health Plan 5. CHA, Inc. 6. Finch Paper 7. General Electric 8. Global Foundries 9. Golub Corporation 10. Key Bank 11. National Grid 12. Pitney Bowes Business Insight 13. State Employees Federal Credit UnionAlbany County Airport Authority; Albany, New York

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### C. Project Proposal

Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start

- up Cost Offset First Service Study S ecure Additional Service Other (explain below)

_______________________________________________________________________________________

________________________ _______________________________________________________________ 

### D. Existing Landing Aids at Local Airport

Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify)



### E. Project CostAlbany County Airport Authority; Albany, New York

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### F. In

- Kind Contributions**

For funds in lines 5 a (Air port In

- Kind contribution) and 5 b (Other In

- Kind contribution), please describe the source(s) of fund(s) for each.
(5a) Albany International Airport wi ll provide fee waivers estimated to be $481,908 f or the proposed new service. ( The Amount displayed for airport in

- kind contribution assumes an incumbent carrier operates the proposed service. In the event a non

- incumbent carrier operates new service, th e Airport's incentive program provides for incentives valued at up to $1.5 million. ) (5b) Various media companies and outlets in the Capital Region will provide advertising and marketing valued at $291,600 to promote the proposed service. These media com panies and outlets include The Albany Times Union, Clear Channel Communications, Time Warner, Pamal Broadcasting, WGDJ, WGNA, WGRB Channel 6, WTEN Channel 10, WNYT Channel 13, and Fox 23.



### G. Is this application subject to review by state under Executive Ord er 12372 Process?

a. This application was made available to the State 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 State for rev iew.
c. Program is not covered by E.O. 12372



### H. Is this applicant delinquent on any federal debt?

No
Yes (explain)Albany County Airport Authority; Albany, New York

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### APPENDIX B: LETTERS OF SUPPORTAlbany County Airport Authority; Albany, New York

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- 0119 54Albany County Airport Authority; Albany, New York

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- 0119 55Albany County Airport Authority; Albany, New York

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- 0119 56Albany County Airport Authority; Albany, New York

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- 0119 57Albany County Airport Authority; Albany, New York

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- 0119 58Albany County Airport Authority; Albany, New York

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- 0119 59Albany County Airport Authority; Albany, New York

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- 0119 60Albany County Airport Authority; Albany, New York

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- 0119 61Albany County Airport Authority; Albany, New York

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- 0119 62Albany County Airport Authority; Albany, New York

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- 0119 63Albany County Airport Authority; Albany, New York

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