## Sponsor: City of Naples Airport Authority Theodore D. Soliday, Executive Director

Dun & Brad street DUNS Number : 092230952 Tax Identification Number: 59

- 1318107 Congres sional District Code: FL

- 14 

# Naples Municipal Airport Naples, Florida

Proposal U nder the Small Community Air Service Development Program

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## TABLE OF CONTENTS

INTRODUCTORY LETTER

................................ ................................ ................................ .......................... 4 SUMMARY INFORMATION (SOLICITATION APPENDIX C)

................................ ................................ ..... 5

A. Applicant Information

................................ ................................ ................................ ................................ .......... 5 B. Public/Private Partnership

................................ ................................ ................................ ................................ .... 5 C. Project Proposal

................................ ................................ ................................ ................................ .................... 5 D. Existing Lan ding Aids at Airport

................................ ................................ ................................ .......................... 6 E. Project Cost

................................ ................................ ................................ ................................ ............................. 6

F. In

- Kind Contributions

................................ ................................ ................................ ................................ .............. 7 G. Is Application Subject to Review by State Under Executive Order 12372 Process?

................................ 7 H. Is Applicant Delinquent on Any Federal Debt?

................................ ................................ .............................. 7



### EXECUTIVE SUMMARY

................................ ................................ ................................ ........................... 8
AIR SERVICE OVERVIEW

................................ ................................ ................................ ........................ 9

Catchment Area

................................ ................................ ................................ ................................ ........................ 9
Ai r Service Needs

................................ ................................ ................................ ................................ ..................... 11
Tourism

- related Air Service Needs

................................ ................................ ................................ ........................ 11 Economic Development Air Service Needs

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



### EXISTING AIR SERVICE

................................ ................................ ................................ ......................... 13
HISTORICAL AIR SERVICE

................................ ................................ ................................ .................... 15

Overview

................................ ................................ ................................ ................................ ................................ .... 15 The Delta Connection Experience

................................ ................................ ................................ ....................... 16
Market

- Level Details of the Delta Connection Service

................................ ................................ .................... 18
Air Service D evelopment Efforts

................................ ................................ ................................ ............................ 19



### STRATEGIC PLAN

................................ ................................ ................................ ................................ .. 20

Proposed New Route

................................ ................................ ................................ ................................ .............. 20
Goals

................................ ................................ ................................ ................................ ................................ .......... 20 Significant Changes since Previous Delta Connection Service

................................ ................................ ...... 20
Route

- Specific Information: Naples

– Atlanta

................................ ................................ ................................ .... 21 Path to Sustainability

................................ ................................ ................................ ................................ ............... 24 Grant Amendments / Alternative Strategies

................................ ................................ ................................ ...... 25Naples Municipal Airport, Naples, Flo rida

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## TABLE OF CONTENTS

PROJECT IMPLEMENTATION, MONITORING AND FUNDING

................................ .............................. 26

Public/Private Partnerships

................................ ................................ ................................ ................................ ..... 26 Project Funding

................................ ................................ ................................ ................................ ......................... 28 Implementation Timeline

................................ ................................ ................................ ................................ ........ 30 Project Monitoring

................................ ................................ ................................ ................................ .................... 31 Legal Sponsor

................................ ................................ ................................ ................................ ............................ 31
Financial Controls

................................ ................................ ................................ ................................ ..................... 32Naples Municipal Airport, Naples, Flo rida

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### INTRODUCTORY LETTERNaples Municipal Airport, Naples, Flo rida

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### SUMMARY INFORMATION (SOLICITATION APPENDIX C )

Small Community Air Service Development Program
Docket DOT

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### A. A pplicant Information

Not a Consortium Community now receives EAS subsidy
Interstate Consortium Intrastate Consortium Community previously receive d a Small Community Grant If previous recipient, date of Grant: ________________________________

expiration date of G rant: _______________________



### B. Public/Private Partnership

Public:

City of Naples Airport Authority Gre ater Naples, Marco Island, and Everglades Convention and Visitors Bureau

Private:

Collier County Lodging Association Economic Development Council of Collier County Friends of the Naples Municipal Airport Greater Naples Chamber of Commerce



### C. Project Pro posal

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

- Up Cost Offset First Service Study Secur e Additional Service Other (Specify)Naples Municipal Airport, Naples, Flo rida

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### D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instrument Approach
Localizer Other: VOR/DME, GPS/RNAV

, ASOS, ATCT, PAPIs, REILs, ADS

- B



### E. Project Cost

Line Description Sub Total Total Amount 1 Federal amount requested $ 750,000

2 State cash financial contribution $

-
Local cash f inancial contribution

3a Airport cash funds $ 385,000

3b Non

- airport cash funds $ 100,000

3 Total local cash funds (3a+3b) $ 485,000

4 TOTAL CASH FUNDING (1+2+3) $ 1,235 ,000

In

- Kind contribution

5a Airport In

- Kind contribution** $ 2, 372 ,000

5b Other In

- Kind contribution** $

-
5 TOTAL IN

- KIND CONTRIBUTION (5a+5b) $ 2, 372 ,000

6 TOTAL PROJECT COST (4+ 5 ) $ 3, 607 ,000Naples Municipal Airport, Naples, Flo rida

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### F. In

- Kind Contributions

For funds in lines 5 a (ai rport in

- kind contribution) and 5 b (other in

- kind contribution), please describe the source(s) of fund(s) for each.

In

- Kind Contributions from City of Naples Airport Authority $ 2,372 ,000

Value of airport personnel processing air carrier f lights on behalf of carrier ("above" and "below" wing processing) $ 1,612,000 Waived Airport Facility Rentals $ 200,000 Waived Ground Support Equipment Rentals $ 200,000 Waived Landing Fees $ 200 ,000 Waived Fees related to Common Use Passenger Processing System $ 100,000 Value of additional insurance, legal fees, miscellaneous incurred by airport $ 60,000



### G. Is Application Subject to Revie w by State Under Executive Order 12372 Process?

This application was made available to the State on ______. Program is subject to review, but has not been selected by the State. Program is not covered

.



### H. Is Applicant Delinquent on A ny Federal Debt?

NoNaples Municipal Airport, Naples, Flo rida

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### EXECUTIVE SUMMARY

The City of Naples Airport Authority is requesting a Small Community Air Service Development Grant in the amount of $ 750,000 as part of a multi

- million dollar effort to reintroduce commercial Airline service to Naples Municipal Airport (APF)

. The Department of Transportation’s role would be to support a
Minimum Revenue Guarantee for a two

- year term for service between Naples and Hartsfield

- Jackso n Atlanta International Airport on Delta Connection. Other elements of the program include a $3.2 million runway extension , funded entirely by the Authority, and $2.7 milion of incentives.

The proposed service would re

- establish flights to Atlanta, simil ar to successful service offered in the past. Delta offered service on this route November 2004 through September 2007, with the support of a

m inimum r evenue g uarantee. The route proved so successful, that the carrier did not receive any funds from the g uarantee. Service ended after the guarantee program due to a number of factors, including an industry move away from smaller regional jets on longer stages and payload performance issues
related to aircraft selected for the route. However, we believe tha t these issues can both be resolved.

By re

- establishing air service to the largest single airline hub, Naples
would be reconnected
to the world. This would enhance the region ’ s economic development efforts for key business segments. Access to
traveller s is key to ensuring a robust tourism economy, and tourism is the top economic driver in the region. Additionally, Naples is home to several unique and growing companies in the software development and healthcare fields, which need greater
access to the a ir transportation system.Naples Municipal Airport, Naples, Flo rida

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### AIR SERVICE OVERVIEW

Catchment Area

The Naples Metropolitan Statistical Area consists of Collier County. As of July 2010, it is estimated the Census Bureau that the population of Collier County is 321,861. As one of the faste st growing counties in
the nation, Collier County has grown by almost 27% since 2000. Additionally, Collier County estimates its seasonal population, to include partial year residents who drive additional needs for utilities, roads, and other public servi ces. For 2010, Collier County estimated its peak population at 389,149 people.

Exhibit 1 : Naples, Florida MSA Population and Cumulative Growth Source: US Census Bureau

Collier County, along with Charlotte and Lee Counties, make up a region often refe rred to as Southwest Florida. Collier County makes up 30% percent of the regional population. However, Collier County’s high income per capita results in the production of 35% of the region ’ s Gross Domestic Product.

254.1 264.2 275.4 285.1 295.6 306.9 311.9 313.8 316.0 317.9 321.9

4.0% 8.4% 12.2% 16.4% 20.8% 22.7% 23.5% 24.4% 25.1% 26.7%

0% 5% 10% 15% 20% 25% 30% 35% 40%

200 225 250 275 300 325 350

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Cumulative Growth MSA Population (Thousands) Naples MSA Population Cummulative GrowthNaples Municipal Airport, Naples, Flo rida

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- 0119 10 Exhibit 2 : Regional Map and Populatio n Source: US Census Bureau

Exhibit 3 : Regional Population, Per Capita Income, and GDP Production Source: US Census Bureau; US Department of CommerceNaples Municipal Airport, Naples, Flo rida

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### Air Service Needs

Naples’ Air Service needs fall into two categories: Tourism

- related and Economic Development. The needs of both sectors can only be met by true access to a major airline hub network. The most logical network for Naples air service is the Delta Air Lines hub at Hartsfield

- Jackson Atlanta International Airport.



### Tourism

- related Air Se rvice Needs

Like most of Florida, tourism is a critical economic driver in Naples and Collier County. In 2010, almost 1.4 million tourists visited Collier County, spending $782 million and creating a total economic impact of almost $1.2 billion

.

Exhibit 4 : Collier County Tourism Statistics Source: Naples, Marco Island, and Everglades Visitors and Convention Bureau, 2010 Visitor Profile

2009 2010 Change Visitor Information # Visitors 1,338,800 1,383,500 +3.3% Party Size 2.5 people 2.5 people n/c Length of Stay 4.6 days 4.6 days n/c Arrived by Air 54.7% 54.6% n/c Economic Impact of Visitors Direct Visitor Expenditures $756,482,900 $782,078,400 +3.4%
Per

- Person Total Expenditure

- Total $565 $565 n/c
Per

- Person Total Expenditure

- Domestic $53 7 $537 n/c
Per

- Person Total Expenditure

- International $732 $745 +1.7%
Per

- Person/Per

- Day Expenditure $123 $123 Even Economic Impact $1,127,916,007 $1,166,078,894 +3.4% Groups/Meetings Economic Impact $81,733,920 $98,148,800 +20.1%

An important mecha nism to monitor tourism is hotel data. Hotels are located near popular tourist
destinations, and tourists choose hotels because of their locations. In Southwest Florida, 35% of all hotel rooms are located in Collier County. Because Collier County’s Aver age Room Rate and Occupancy

R ate is higher than other parts of the region, Collier County actually draws approximately 50% of the region ’ s hotel revenue.Naples Municipal Airport, Naples, Flo rida

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- 0119 12 Furthermore, there is anecdotal evidence of an erosion of business due to the lack of access. Resorts in the Marco Island area have reported that they have reduced or suspended marketing programs. They have explained that their potential customers demand more convenient access to air service than is afforded them by Southwest Florida International Airpor t, almost two hours north.

Exhibit 5 : Lodging Unit Map Source: Florida Department of Business and Professional RegulationNaples Municipal Airport, Naples, Flo rida

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### Economic Development Air Service Needs

Naples is home to three emerging companies in the computer technology and healthcare indus tries which demonstrate the growing need for improved air service in Naples.

Allen Systems Group (ASG) is one of the largest privately

- held software developers in the world. The company was founded by retired software innovator Arthur L. Allen in Naples in 1986. While ASG is a small company by employee count, with only 1,300 employees, its travel needs are large. First, all employees are required to visit the Naples headquarters. These employees are based in approximately
90 offices worldwide. Second, a key element of ASG’s growth has been the acquisition of other companies throughout the world, necessitating travel to those locations.

Locally

- based Arthrex is an innovator in the field of arthroscopic surgery. The company develops new surgical proced ures as well as manufactures cutting edge devices and technology to facilitate surgery. The company announced on April 15, 2011

, a $19 million expansion of its manufacturing facilities in Collier County, adding 150 jobs when completed and hundreds of addi tional jobs in the following years. In addition to development and manufacturing activities, Arthrex also trains surgeons in the new procedures and products in Naples.

Lastly, Naples

- based Health Management Associates (HMA) is a leader in rural healthcar e. HMA operates 59 hospitals with almost 9,000 beds in 15 states throughout the southeastern and s outhwestern
United States.



### EXISTING AIR SERVICE

At this time, Naples Municipal Airport has no c ommercial a irline s ervice. Service ended in September
200 8 when commuter carrier Yellow Air Taxi suspended its flights

. The last air service meaningfully connected to the national air transportation system ended in September 2007, with the withdrawal of Delta Connection from the Naples market.

Regional air s er vice is provided by Southwest Florida Regional Airport (RSW) , approximately 50 minutes from Naples and approximately 90 minutes from Marco Island. While Southwest Florida International Airport does fill s ome of Naples’ air service need , we believe the com bination of distance, travel time,Naples Municipal Airport, Naples, Flo rida

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- 0119 14 and processing time required to use that facility result s in less travel to Naples, and less economic benefit to the region.

Naples is also one of the largest MSA’s without air service through its primary airport. It is unique among
its MSA’s of its size as well, as it has a larger tourist draw than most and an impressive per capita income.

Exhibit 6 : MSA’s Ranked 131 through 160 by Population and their O&D Traffic Levels Source: US Census Bureau; US Department of Comm erce; US DOT Data, Table DB1A

Rank Metropolitan Statistical Area (MSA) Primary Airport MSA Population

(2009) Per Capita

Income (2009) Domestic O&D

Traffic (2010) 131 Killeen

- Temple

- Fort Hood, TX GRK 379,231 $39,344 390,120 132 Davenport

- Moline

- Rock Islan d, IA

- IL MLI 379,066 $38,670 848,370 133 Beaumont

- Port Arthur, TX BPT 378,477 $36,597 34,300 134 Peoria, IL PIA 375,865 $39,818 449,770 135 Anchorage, AK ANC 374,553 $46,217 3,277,320 136 Montgomery, AL MGM 366,401 $35,882 337,400 137 Trenton

- Ewing, N J TTN 366,222 $51,947 0 138 Hickory

- Lenoir

- Morganton, NC HKY 365,364 $29,840 0 139 Fayetteville, NC FAY 360,355 $40,045 459,080 140 Tallahassee, FL TLH 360,013 $33,833 569,710 141 Wilmington, NC ILM 354,525 $33,964 730,910 142 Rockford, IL RFD 353,722 $31,970 143,130 143 Evansville, IN

- KY EVV 351,911 $36,475 286,070 144 Eugene

- Springfield, OR EUG 351,109 $33,562 650,460 145 Ann Arbor, MI 347,563 $37,859 0 146 Savannah, GA SAV 343,092 $38,348 1,424,200 147 Ocala, FL 328,547 $31,097 0 148 Kalamaz oo

- Portage, MI AZO 326,634 $33,075 200,790 149 Naples

- Marco Island, FL APF 318,537 $60,049 0 150 South Bend

- Mishawaka, IN

- MI SBN 317,538 $34,196 568,230 151 Kingsport

- Bristol

- Bristol, TN

- VA TRI 305,629 $31,770 353,990 152 Green Bay, WI GRB 304,783 $36, 742 608,420 153 Charleston, WV CRW 304,214 $37,687 460,160 154 Boulder, CO 303,482 $48,056 0 155 Roanoke, VA ROA 300,399 $38,322 537,600 156 Fort Collins

- Loveland, CO FNL 298,382 $37,844 68,060 157 Lincoln, NE LNK 298,012 $37,361 233,780 158 Utica

- R ome, NY UCA 293,280 $33,269 0 159 Fort Smith, AR

- OK FSM 293,063 $30,896 150,650 160 Columbus, GA

- AL CSG 292,795 $36,577 98,040Naples Municipal Airport, Naples, Flo rida

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- 0119 15 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 American Eagle Delta Connection US Airways Express Others 

### HISTORICAL AIR SERVICE

Overview

Historically, Naples Municipal Airport has been a vital part of the air service provided in Southwest Florida. The airport maintained continuous airline service from 1957 through 200 3 . However, changing air travel habits and September 11, 2001

, have contributed to a decline in traffic since the peak in 1995. At that time, all nonstop air s ervice from Naples was confined to service within the state of Florida. Only American Eagle provided access to a true hub in Miami. Delta Connection and US Airways Express provided access to their networks via large Florida gateways, allowing for limited one

- stop connections to certain hubs and large markets, but requiring two stops to reach most destinations.

Since 1996, traffic at Naples has been in decline, largely driven by factors outside the airport’s control.
The intra

- state service provided by D elta Connection and US Airways Express became less and less competitive, as travel habits changed. The increasing availability of nonstop and one

- stop interstate connections at nearby Southwest Florida Regional Airport also added to the competitive pressu re. By
1997, Delta Connection ended its intra

- Florida service. The US Airways Express service remained in place until 2003, as it was better supported by intra

- state travellers to which it catered.

Exhibit 7 : Annual Passengers by Airlines Source: Napl es Municipal AirportNaples Municipal Airport, Naples, Flo rida

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101

78 70 98

77
64

47 96

75

58 75 97

70

40 50 70

48

33 81% 82%

72% 71%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

0 20 40 60 80 100 120 140

2004-Q4 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 Load Factor Passenger and Seats per Day Each Way Seats Per Day Each Way Passengers Per Day Each Way Load Factor The airport’s only true hub access was service to Miami via American Eagle , which was eliminated in the aftermath of September 11, 2001. Driven by the economic problems which began in May 2001 and the
uncertainties related to the econ omy and travel that followed the terrorist attacks, airlines began dramatically reshaping their networks. It was during this period that American eliminated service to Naples.



### The Delta Connection Experience

In late 200 3 , with service reduced to 9

- seat a ircraft to Key West and other in

- state airports, the City of Naples Airport Authority took action. With the backing of the Fly Naples Team and a locally

administered 2

- year minimum revenue guarantee program, Naples was able to secure a commitment
from Del ta Air Lines for three daily flights operated by Delta Connection to Atlanta.

Three daily nonstop flights between Naples and Atlanta began in November 2004 with 40

- seat regional jets. The service was an instant hit with load factors around 80%. In fact, load factors were in excess of 80% during the first quarters of 2005 and 2006. Compared to Delta’s service at Southwest Florida International Airport in Fort Myers, the average one

- way fare at Naples was between 21% and 57% higher. This was critical to ensuring the success of a smaller, higher cost aircraft.

Exhibit 8 : Delta Seats and Passengers per Day and Load Factor from Naples Source: US DOT Data; Tables DB1A and T

- 100Naples Municipal Airport, Naples, Flo rida

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$157 $188 $201

$183 $220 $221 $229

$189 $210 $256

$241

$206

$129 $130 $128 $125 $142 $147 $164
$151 $156 $153 $168 $166

21% 45% 57%

46% 55% 50%

39%

26% 34% 67%

43%

24%

0% 10% 20% 30% 40% 50% 60% 70% 80%

$100 $120 $140 $160 $180 $200 $220 $240 $260

2004-Q4 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 Fare Premium Average Fare DL/APF Average Fare DL/RSW Average Fare APF Fare Premium During the summer months of 2005 and 2006, load factors were not as strong. Thi s was driven by aircraft payload performance issues during the hot summer months which restricted the number of seats available to be filled on certain flights. Nevertheless, average fares remained high to compensate for the empty seats. For the summer of 2006, Delta reduced the number of daily flights from 3 to 2. In response to the summer payload issue, the authority began planning for a runway extension, due to be completed in December 2011, to solve the problem.

At the end of the Minimum Revenue Guarantee Program, every goal had been met, and no funds were paid to Delta. Instead, all funds were returned to their local sponsors. Delta continued flying two flights through the w inter of 2006

- 07. Load factors were not as strong

, driven by an even greater premium over Southwest Florida International Airport

– reaching 67% in the first quarter 2007

– and the reduced convenience of two flights versus three. The summer of 2007 saw a similar pattern to the previous summers.

Exhibit 9 : Average One

- Way Fare on Delta from Naples and Fort Myers Source: US DOT Data; Table DB1ANaples Municipal Airport, Naples, Flo rida

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- 0119 18 Delta discontinued service from Naples in September 2007. By early 2008, Delta announced sweeping network changes including the retirement of up to seventy smaller gauge regional j ets. Also, during this time, Delta began systematically removing routes that met certain profiles from its network , including longer stage length flights on smaller regional jets. We believe the cessation of Naples service to be a part of these efforts.



### Market

- Level Details of the Delta Connection Service

During the almost three years of Delta Connection Service at Naples, Delta flew approximately 138,320 passengers to and from Naples. Of those passengers, 23,510, or 17%, were local passengers destined for Atlanta. Delta’s top flow destinations include major northeast business centers and midwestern and
southern cities with strong ties to Southwest Florida.

Exhibit 10 : Delta’s 25 Largest Markets from Naples, 2004

- Q4 through 2007

- Q3 Source: US DOT Data ; Table DB1A

0 1,000 2,000 3,000 4,000 5,000 6,000 ATL - 1 WAS Area - 2 SDF - 3 LEX - 4 NYC Area - 5 BNA - 6 CVG - 7 LAX Area - 8 CHI Area - 9 BDL - 10 BOS - 11 MCI - 12 BHM - 13 LAS - 14 SFO Area - 15 CMH - 16 RDU - 17 TYS - 18 DAY - 19 DEN - 20 DFW Area - 21 PIT - 22 RIC - 23 BUF - 24 IND - 25 23,510 4,740 4,350 3,790 3,790 3,690 3,260 3,230 2,940 2,710 2,530 2,190 2,180 1,980 1,970 1,860 1,860 1,840 1,620 1,470 1,410 1,350 1,330 1,260 1,260 O&D Passengers Note: ATL not to scaleNaples Municipal Airport, Naples, Flo rida

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- 0119 19 41% of Delta’s Naples passengers were destined for Atlanta or other destinations available nonstop from Fort Myers. This indicates a strong passenger demand for service to Naples Municipal Airport, even when very competitive service exists fr om Fort Myers,

Exhibit 11 : Passenger per Day Each Way from Naples in Competitive Markets Source: US DOT Data, Table DB1A



### Air Service Development Efforts

Since the end of network carrier service in 2007, the City of Naples Airport Authority has been working to

re

- establish commercial airline service at the a irport. Efforts have included industry outreach through airline/airport events such as the Jump Start Conference hosted by Airports Council International

– North America, as well as hosting airlin e executive visits to our region. We have also implemented a project to lengthen our primary runway’s take

- off distance through the use of displaced thresholds in part due to airline feedback and analysis of payload performance for aircraft that operate a t Naples Municipal Airport. 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Passengers Per Day Each Way (PDEW)

APF PDEW to destinations WITHOUT nonstop flights from RSW

APF PDEW to destinations WITH nonstop flights from RSW
APF PDEW to ATLNaples Municipal Airport, Naples, Flo rida

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### STRATEGIC PLAN

Proposed New Route

The Naples Airport Authority proposes to use a combination of a irport Incentives and Minimum Revenue Guarantee provided by the Small Community Air Service Development Program to secure nonsto p
service to Hartsfield

- Jackson Atlanta International Airport on a Delta Connection carrier . Furthermore, the airport proposes to support Delta with marketing assistance to be provided by both the City of Naples Airport Authority and other local sources. The proposed service would re

- establish a proven
market, carrier and hub service to Southwest Florida. These benefits will be made available to the airline

over a two

- year term.



### Goals

Naples Municipal Airport has three goals with its Small Community Ai r Service Development Grant proposal for service to Atlanta:

 Reintroduce a proven route, hub, and brand to the Naples market

 Recapture catchment area traffic lost to other airports

 Improve access to air service for Naples and Collier County residents and b usinesses



### Significant Changes since Previous Delta Connection Servic e

There have been numerous significant changes at Delta Air L ines, in the airline industry, and at Naples Municipal Airport since the previous Delta Connection service

.

First, there hav e been numerous airline mergers since 2005, including America West/US Airways (2005), Delta/Northwest (2008), United/Continental (2010), and Southwest/AirTran (2011). These mergers have significantly reduced the number of brands in the marketplace. The r egional carriers who provide smaller capacity aircraft to the large carriers with coordinated brands have also been a part of the consolidation. Regional aircraft provider Republic Holdings acquired Frontier Airlines and Midwest Airlines and merged them i nto a single brand. SkyWest, Inc. acquired ASA and ExpressJet. The regionalNaples Municipal Airport, Naples, Flo rida

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- 0119 21 consolidation reflects the reduction in the number of partner brands available to the regionals as well as the reduction in regional jet demand from those partners.

Second, as p art of its capacity rationalization, Delta has implemented dramatic changes to its fleet plan. These changes include the elimination of all regional jets with less than 50 seats from the Delta Connection fleet, including those which previously flew betwee n Naples and Atlanta. Additionally,
Delta has recently announced the retirement of 70 additional small capacity aircraft including its entire
fleet of 34

- seat turbo

- props and a number of 50

- seat regional jets.

Third, on July 25, 2011 Naples Municipal A ir port has begun construction of displaced thresholds on

Run ways 5 and 23. This 100% authority

- funded $3.2 million runway extension, primarily a safety and general aviation project , will be completed this year . However, it will have the intended additional benefit of enhancing payload performance on regional jet departures by allowing for 800 additional feet of runway. In addition to reducing payload restrictions on the regional jets used in the previous service, the displaced thresholds will allow for the safe operation of 5 0

- to 70

- passenger regional jets commonly used today

.



### Route

- Specific Information: Naples

– Atlanta

Exhibit 12 : One

- stop Connections from Naples via Atlanta on Delta/Delta Connection, YE 4Q10 Source: Sixel Consulting Group Hub BuilderNaples Municipal Airport, Naples, Flo rida

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- 0119 22 The City of Naples Airport Authority proposes three daily nonstop flights between Naples Municipal Airport and Hartsfield

- Jackson Atlanta International Airport on Delta Connection, using 60

- to 70

- seat regional jets. The Naples

- Atlanta service would c reate access to over 170 destinations beyond the
hub with one

- stop, single

- carrier connections. This service has a track record of success in 2004

- 2007 that can be replicated in the current environment with the economics of a 60

- to 70

- seat regional jet.

In 2010, Southwest Florida generated 9,858 Passengers per Day Each Way (PDEW). This represents a 7% decline in regional traffic since service to Naples ended.

Exhibit 13 : Passengers per Day Each Way (PDEW) from Southwest Florida Source: US DOT Data, Ta ble DB1A

Based on the information we have presented in the Air Service Overview section, we believe that the Naples area generates at least 35% of the traffic in Southwest Florida. We believe this is true for both inbound traffic, driven by the hotel dat a, as well as outbound traffic, driven by the population and regional GDP data. However, operating three daily flights, Delta would need to capture less than 2% of Southwest Florida air traffic at Naples in order to be successful. By our estimate, Delta would need to carry approximately 95,000 passengers per year or 130 passengers per day each way to achieve a 75% load factor. This would equate to 1.46% of 2010 Southwest Florida passengers.

0 2,000 4,000 6,000 8,000 10,000 12,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

6,601 6,502 7,369 8,193 9,542 9,738 10,285 9,580 9,445 9,528 223 216 208 256 272 263 289 316 312 330 Passengers per Day Each Way (PDEW) Domestic PDEW International PDEWNaples Municipal Airport, Naples, Flo rida

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- 0119 23 Exhibit 14 : Estimated Top 20 Markets from Naples for Delta at P roposed Capacity Levels Source: Year Ending 4Q 2010 US DOT Data, Table DB1A

Regional jets have higher seat costs than larger narrow

- body jets. To compensate for the higher cost, the carrier must be able to achieve a reasonable premium over the fares of fered at Southwest Florida by larger, and lower seat

- cost aircraft . Delta has shown they can successfully attract passengers, even with a fare premium to offset the higher cost aircraft required at Naples. Naples passengers have demonstrated that they ar e willing to pay a reasonable premium versus Fort Myers for the location and small airport convenience of Naples Municipal Airport.

0 2,000 4,000 6,000 8,000 10,000 12,000 NYC Area - 1 CHI Area - 2 BOS - 3 DTW - 4 WAS Area - 5 MSP - 6 PHL - 7 IND - 8 MKE - 9 CLE - 10 PIT - 11 CMH - 12 ATL - 13 STL - 14 HPN - 15 BUF - 16 CVG - 17 DEN - 18 PVD - 19 DFW Area - 20 10,545 9,477 6,662 5,768 5,036 4,522 3,379 3,202 2,661 2,528 2,386 2,308 2,166 2,012 1,875 1,619 1,476 1,403 1,333 1,246 14.4 13.0 9.1 7.9 6.9 6.2 4.6 4.4 3.6 3.5 3.3 3.2 3.0 2.8 2.6 2.2 2.0 1.9 1.8 1.7 Annual O&D PDEWNaples Municipal Airport, Naples, Flo rida

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

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- 0119 24 Exhibit 15 : Estimated One

- Way Naples Fares and Premium versus Fort Myers for Delta’s Top Markets Source: Year Ending 4Q10 US DOT Data, Table DB1A



### Path to Sustainability

The City of Naples Airport Authority shares the Department’s view that the supported air service must be
self

- sustaining on a long

- term basis. As such, the Authority will work with the air carrier on esta blishing success benchmarks during the program. Additionally, the Authority is willing to continue the Airport incentives for as long as legally possible, so long as progress is being made toward long

- term sustainability.

Furthermore, our analysis of the Southwest Florida market and previous experience lead us to believe
that the program goals are obtainable. We have demonstrated that the community will respond to reasonable fare levels, although higher than nearby airports, which make s small

- jet service viable. At a reasonable load factor, we believe traffic would be much less than the 1995 peak, while requiring Naples to capture less than 2% of the region’s air traffic. Finally, the $3.2 million runway extension project will ensure the aircraft used w ill have adequate payload performance to operate with the load factors necessary to be sustainable year

- round.

$0 $50 $100 $150 $200 $250 $300 NYC Area - 1 CHI Area - 2 BOS - 3 DTW - 4 WAS Area - 5 MSP - 6 PHL - 7 IND - 8 MKE - 9 CLE - 10 PIT - 11 CMH - 12 ATL - 13 STL - 14 HPN - 15 BUF - 16 CVG - 17 DEN - 18 PVD - 19 DFW Area - 20 $246 $188 $212 $166 $196 $199 $212 $192 $169 $196 $164 $134 $152 $195 $189 $262 $156 $246 $199 $228 94% 62% 56% 50% 61%

39% 58% 53% 53% 50% 47% 26% 26% 50%

50% 107% 13% 64%

50% 48% Estimated Fare

Fare PremiumNaples Municipal Airport, Naples, Flo rida

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

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- 0119 25 

### Grant Amendments / Alternative Strategies

The Authority’s primary air service development goal is to re

- establish air carrier service at the air port, with coordinated and branded service to a major southeastern hub. This is driven by the desire to maximize access to the air transportation system with the new air service, and maximize the economic benefits to the region of the Naples Municipal Air port.

If the Department awards Naples a Small Community Air Service Development grant for service to Atlanta, but the community is unsuccessful in recruiting Delta to operate the service, the community may request the Department consider redirecting the a ward funding to assist in recruiting service from Naples to Charlotte

- Douglas International Airport on US Airways Express or to Miami International Airport on American Eagle. It is the Authority’s view that these alternate strategies offer similar network benefits and would fulfill our primary air service development goal.Naples Municipal Airport, Naples, Flo rida

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

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### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

Public/Private Partnerships

The City of Naples Airport Authority understands that in order to be successful in re

- establishing air

se rvice and to ensure the sustainability of the service, the strong support and commitment of key business organizations is essential. In 2003, a partnership of public and private agencies formed the Fly Naples Team with one goal: to strongly support air se rvice development at Naples Municipal Airport to benefit the community. The team members, who receive direction and guidance from the Naples Airport Authority Executive Director, are listed below.

The City of Naples Airport Authority will provide oversig ht, guidance, and direction to Fly Team Naples as the lead agency. The Authority will have sole administration and oversight of any Small Community Air Service Development grant funding . Additionally, the Airport authority will provide a great deal of in

kind support to a new commercial airline, including providing the carrier with airport facilities, ground support equipment, common

- use passenger processing equipment, security services, and airport staff to operate flights with no airport costs. Additio nally, the Authority will provide funds for marketing the
new air service in the local area.

Naples, Marco Island, and Everglades Convention and Visitors Bureau will provide in

- kind advertising in the origin markets for inbound travellers related to the n ew air service. This includes cooperative opportunities through its relationship with Visit Florida, the official state tourism agency.

The goal of Greater Naples Chamber of Commerce is to support business growth and business retention in our region. Th e Chamber supports air service efforts via its direct mail publication which is distributed to more than 2,000 members. In addition, the Chamber utilizes internet advertising and a state

- of

- the

art visitor center.

Economic Development Council of Collier County has targeted aviation and transportation infrastructure as one of its key focuses. The EDC supports air service initiatives by assisting with marketing and demographic research.Naples Municipal Airport, Naples, Flo rida

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

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- 0119 27 The Collier County Lodging Association assists Fly Team Naples by ass isting with promotional opportunities and venues, as well as providing accommodations for visiting airline executives.

Friends of Naples Municipal Airport serve as an important community goodwill ambassador for the airport, and promotes the value of local air service via member involvement in numerous business and civic organizations. The group hosts airport tours and the community’s only Aviation Day and Airport Open House, designed to bring residents (and potential travellers) to the airport and showcas e its role in our community. The Friends include:

 Allen Systems Group (ASG)

 H ealth Management Associates (HMA)

 Bond, Schoeneck & King

 Jack Antaramian

 Kraft Construction

 LaPlaya Hotels

 Craig Construction

 Bob Taylor Chevrolet

 Quality Enterprises

 Core Const ruction

 Rooney Brothers

 Barron Collier FamiliesNaples Municipal Airport, Naples, Flo rida

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

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### Project Funding

In addition to the Small Community Air Service Development grant, the City of Naples A irport A uthority intends to provide everything the air carrier needs, so that the airport start

- up cos ts will be as low as possible. This includes:

 Staffing airline operations on behalf of the air carrier at Naples Municipal Airport, including personnel to perform duties related to check

- in, passenger processing, boarding, baggage handling, and ramp opera tions

 Providing all ground equipment needed to handle the aircraft, such as baggage carts and tugs

 Acquiring a common

- use passenger processing system, which will have the ability to interact with the airline’s reservations system

 Waived terminal and facili ty rentals

 Security services at no cost to the carrier

 Local Marketing support

Additionally, the Naples, Marco Island, and Everglades Convention and Visitors Bureau will provide $100,000 of origin marketing support.

Exhibit 16 : Summary of Sources and Type s of Funding

Funding Source Minimum Revenue Guarantee Airport

Services Marketing Total

Cash Contributions Department of Transportation $750,000

- $750,000 City of Naples Airport Authority $ 260,000 $1 25 ,000 $385,000 Naples, Marco Island, and Everglad es Convention and Visitors Bureau $100,000 $100,000

Total Cash Contributions $750,000 $260,000 $2 25 ,00 0 $ 1
, 235 ,000 In

- Kind Contributions City of Naples Airport Authority $2,372,000 $2,372,000 Total In

- Kind Contributions $2,372,000 $2,372,000

Total Project Funding $750,000 2,632,000 $225,000 $3,607,000Naples Municipal Airport, Naples, Flo rida

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

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- 0119 29 Exhibit 17 : Summary of City of Naples Airport Authority Funding

Cash Contributions from City of Naples Airport Authority $ 385 ,000

Common Use Passenger Processing Syst em to be provided by airport $ 180,000 Security Costs $ 60,000 Local Marketing and Advertising $ 1 25 ,000 Value of Special Events, such as service announcement and inaugural flight activities $ 20,000

In

- Kind Contributions from City of Naples Airport Authority $ 2,372 ,000

Value of airport personnel processing air carrier flights on behalf of carrier ("above" and "below" wing processing) $ 1,6 12,000 Waived Airport Facility Rentals $ 200,000 Waived Ground Support Equipment Rentals $ 200,000 Waived Landing Fees $ 200 ,000 Waived Fees related to Common Use Passenger Processing System $ 100,000 Value of additional insurance, legal fees, miscellaneous incurred by airport $ 60,000

Exhibit 18 : Summary of Cash Community Funding

Cash Contributions from Fly Naples Team $ 100 ,000
Ori gin City Marketing, provided by Naples, Marco Island, and Everglades Convention and Visitors Bureau $ 1 0 0,000Naples Municipal Airport, Naples, Flo rida

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

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### Implementation Timeline

The proposed implementation timeline assumes the Department will award the grant in September
2011. Once the award is announced, the Authority will begin discussions with Delta to begin service. Based on airline planning lead times, required time to build advance bookings, normal seasonality of

our market, and the timing of the program, we anticipate that there are two potential timelines. The first is an aggressive timeline which launches service in mid

- December 2011 . The second is a more conservative approach designed to capture the entire winter season during the first year of service.

The first milestones on the Authority’s timeline are to execute the agreement with the department and to negotiate the terms of the Minimum Revenue Guarantee with the carrier

. Once service is announced and schedules published, the airline , the Authority , and the co mmunity will begin marketing and monitor advance bookings. The carrier and Authority will continue to monitor bookings once service begins through the life of the program. The Authority will submit grant status reports quarterly to the Department through out the proposed two

- year term of the agreement.

Exhibit 19 : Proposed Project Timeline

Activity/Milestone Aggressive Schedule Conservative Schedule

SCASD Gran t Award Announcement September 2011 September 2011

Execute Gran t Agreement with DOT September 2011 October 2011 Negotiate Minimum Revenue Guarantee with
Airline September 2011 October 2011

– June 2012
Announce Service/Publish Schedule September 2011 July 2012 Market Service/Monitor Advance Bookings (pre

launch) September 2011

– December 2011 Ju ly 2012

– November 2012 $3.2 million Runway Extension complete December 2011 December 2011
Launch Service December 2011 November 2012

Operate Service with MRG December 2011

– December 2013 November 2012

– November 2014

Market Service/Monitor Advance Bookings December 2911 and Beyond November 2012 and Beyond

Submit Grant Status Reports to DOT Quarterly Q4 2011

– Q4 2013 Quarterly Q4 2012

– Q4 2014Naples Municipal Airport, Naples, Flo rida

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

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### Project Monitoring

The success of the project will be based on achieving the objectives of the pr ogram to reinstate and sustain commercial air service. Even before service begins, the A uthority will work with the airline to monitor advanced bookings. Marketing and promotional activities can be adjusted based on
feedback from the carrier as to whethe r the market is booking at an expected rate.

Once service begins, the Authority will rely on traffic and revenue data provided directly from the carrier, and the associated revenue reimbursements requested, as indications of project success. The
Authorit y will use Department data from Tables T

- 100 and DB1A to compare results to the previous
service in 2004

- 2007 and well as year

- over

- year information as it becomes available. Finally, the Authority will report on the program’s success with quarterly grant reports to the Department.



### Legal Sponsor

City of Naples Airport Authority
160 Aviation Drive North Naples, Florida 34104

- 3568 Theodore D. Soliday
Executive Director Office: (239) 643

- 0733 www.flynaples.com

The City of Naples Airport Authority was creat ed by the Florida State Legislature as an independent governmental unit in 1969. Created at the request of the Naples City Council, the Authority is charged with operation, development and improvement of Naples Municipal Airport.Naples Municipal Airport, Naples, Flo rida

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

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### Financial Controls

As the sponsor, the City of Naples Airport Authority will be responsible for all fiscal matters and the Department’s reporting requirements. As a public agency, the Department can rest assured that proper financial controls are in place to guarantee any gra nt awarded will be used in accordance with the subsequent agreement. The Authority, as designated legal sponsor, will ensure that both Department and local funds associated with this project are expended in a manner consistent with the
Grant intention and the contract between the Department and the Authority. The City of Naples Airport Authority understands and recognizes that the Small Community Air Service Development Grant
is a reimbursable program, meaning the Authority is responsible for all program expenditures, and that invoices for reimbursement must be submitted to the Department of Transportation.