Before the Office of the Secretary of Transportation

U.S. Department of Transportation

Modesto City-County Airport / Modesto, California

Proposal Under the Small Community Air Service Development Program, Docket 

DOT-OST-2010-0124

An Integrated Program of New Service Development via;

Start-up Cost Offsets, Advertising/Marketing and Revenue Guarantees 

In Support of New Service to/from Seattle and/or Portland on Horizon Air

Sponsor: Modesto City-County Airport

Modesto, California

Jerome Thiele – Airport Manager

Dun & Bradstreet Number: 060125051, Congressional Code – CA18

August 27, 2010
Table of Contents

Description Page number

Table of Contents 2

Introductory Letter of Support 3

Summary Information 5

Introduction 6

Location and Population 8

Current Air Service 10

Modesto’s 2005 SCASD Grant 12

Modesto Leakage Based on Population 13

Modesto Leakage Based On Economic Output 15

Availability of Alternative Airports 17

Modesto’s Air Service Needs and Deficiencies 18

Modesto’s Airfares 19

Modesto’s Air Service Development Efforts 2005 – 2010 21

Primary Objectives of Proposal 22

Detailed Explanation of Proposal 23

Route and Service Pattern 23

Traffic and Revenue Estimate 25

Modesto Community Information 28

A Strategic Plan for Success 36

Grant Implementation, Milestones & Monitoring 40

Modesto City-County Airport Background 43

Comparison of Modesto to Other California Markets 44

Summary 45

Additional Support Letters 46
August 17, 2010

Dockets Operations and Media Management

M-30, Room PL-401

Department of Transportation

400 7th Street, SW

Washington DC, 20590

Re: Small Community Air Service Development Program, 

 DOT-OST-2010-0124

City of Modesto, California

Dear Proposal Review Board,

Enclosed with this letter is the Modesto City-County Airport’s Small Community Air Service 

Development Program grant proposal. The City of Modesto and Stanislaus County, owners and 

sponsors of Modesto City-County Airport, the Stanislaus Economic Development and Workforce 

Alliance and Modesto Convention and Visitors Bureau have formed a public-private partnership

involving local business and industry for the purpose of attracting new passenger air service 

deemed critical to the economic development of the five county market area.

Horizon Air has indicated that it can operate this service if the Modesto parties provide an 

incentive package that includes: local marketing, advertising, and public relations; reduced fees 

and rents; and a subsidy to off set the initial operating cost of the new air service. The Small 

Community Air Service Development Program will provide the funding and the opportunity to 

develop the incentive program and get the needed air service.

If the Modesto parties are awarded the grant requested herein, then the community can move 

ahead to finalize the agreement with Horizon for nonstop, low fare service to Seattle or Portland. 

The grant monies will be used to finalize the marketing and advertising program; purchase 

advertising and develop promotions and public relations; and help cover the initial start up cost 

of the new air service.

Primary Objectives of Proposal:

Objectives for Program:

• Recruit Modesto’s first competitive airline service in more than a decade

• Reduce airfares through increased competition with a low fare regional carrier

• Make air travel more accessible in California’s central valley

• Increase enplanements in the Modesto market

• Decrease inefficient leakage to other airports in central California

• Increase awareness about local air service

City of Modesto

Public Works Department

Airport Division 617 Airport Way

Modesto CA 95354

209 577-5318

FAX 209 576-1985
Means to Achieve Objectives:

• Recruit Horizon Air service to either the hub in Seattle and/or the hub in Portland

• Seattle is Modesto’s 6th largest domestic market, and Portland is Modesto’s 12th

largest market

• The Modesto parties have had extensive discussions with Horizon Air about the 

potential for a Modesto-Portland/Seattle service

• Combine local risk abatement, startup offset and marketing funds with DOT 

Grant funding to provide adequate incentives for the new carrier

Course of Action to Support Means:

• Provide startup cost offsets for the new carrier

• Provide revenue guarantees to ensure the success of the new service

• Provide marketing support to increase general market awareness of new service

• Focused effort to draw local business travel demand to fly locally

The Modesto parties believe that the Modesto City-County Airport proposal fits the intent and 

purpose of the Small Community Air Service Development Program perfectly. No other 

community the size of Modesto has such poor air service at such high fares and has an 

opportunity to fix this problem almost overnight with the award of this requested grant. We look 

forward to your review of our proposal and if you have any questions, please contact me at 

(209) 577-5318.

Sincerely yours,

Jerome Thiele

Airport Manager

Modesto City-County Airport
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 5

SUMMARY INFORMATION

Small Community Air Service Development Program

Docket DOT-OST-2010-0124

A. Applicant Information

 Not a Consortium Community now receives EAS subsidy

 Interstate Consortium Intrastate Consortium

 Community previously received a Small Community Grant

 If previous recipient, date of Grant: September 12, 2005

Expiration date of Grant: September 12, 2007

B. Public/Private Partnership

Public:

1. Modesto City-County Airport

2. City of Modesto

3. Stanislaus County

Private:

 

1. Stanislaus Business Alliance

2. Modesto Convention and Visitors Bureau
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 6

C. Project Proposal

 Marketing Upgrade Aircraft New Route

 Personnel Increased Frequency Low Fare Service

 Travel Bank Service Restoration Subsidy

 Surface Transportation Regional Service Other (Specify)

 Revenue Guarantee Launch New Carrier

 Start Up Cost Offset First Competitive Service

 Study Secure Additional Carrier

D. Existing Landing Aids at Airport

 Full ILS Outer/Middle Marker Published Instrument Approach

 Localizer Other:

E. Project Cost

1. Federal amount requested: $ 500,000

2. State cash financial contribution: $ 0

3. Local cash financial contribution: $ 50,000

3a. Airport cash funds: $ 25,000

3b. Non-Airport cash funds: $ 25,000

3c. Total local cash funds: $ 50,000

4. TOTAL CASH FUNDING: $ 550,000

5. Local funds contributed from already existing

Programs or projects included in line 3c: $ 0

6. Local funds contributed from new commitments

Or new resources included in line 3c: $ 50,000

7. Airport In-Kind contribution: $ 124,300

Description: (first year airport rent, landing fee & fuel flowage)

8. Other In-Kind contribution: $ 41,000

Description: Media purchase discounts and airport equipment donations 

9. TOTAL IN-KIND CONTRIBUTION: $ 165,300

10. TOTAL PROJECT COST: $ 715,300
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 7

F. Enplanements at Airport

2000: 22,600

2001: 22,013

2002: 17,333

2003: 17,108

2004: 21,574

2005: 20,557

2006: 38,127

2007: 51,580

2008: 36,175

2009: 26,783

G. Is Application Subject to Review 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 any Federal Debt?

 No
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 8

Introduction

The Modesto City-County Airport serves a huge surrounding population. The Modesto MSA has a 

population of 510,385. The population within a 30 minute drive of the Airport is over 627,000.

Yet the airport only has air service from one airline with five flights totaling 150 outbound seats 

per day.

This means Modesto has the fewest airline seats available per capita of any city in California.

Indeed, Modesto is the largest city in California with air service from just one carrier.

The Modest City-County Airport, City of Modesto, Stanislaus County and the Stanislaus Business 

Alliance (the Modesto Parties) propose to address this significant lack of local air service by 

aggressively recruiting a second carrier to serve the Modesto region.

This Grant proposal outlines a plan to recruit Alaska Airlines / Horizon Air to offer Q400 service 

from Modesto to the northwest, specifically Portland and or Seattle. This new service would 

significantly increase Modesto airline capacity and bring much needed price competition and 

consumer air service choice to over 627,000 Californians.

Horizon Air has had significant success at secondary California airports, especially those near 

large metro areas (for example at Santa Rosa). Horizon Air north – south service at secondary 

airports in California is successful because it gives travelers options that avoid the congested 

California freeways needed to access Sacramento or Bay area airports, including congested 

San Francisco International.

Modesto’s grant application, detailed herein, will generate nearly 60,000 annual passengers, a 

significant return on the Small Community Grant dollars that Modesto proposes to use.

The Modesto parties constitute a strong public/private partnership; they recognize of the 

importance of air service to economic health and economic growth. They are committed to 

making new air service at Modesto successful. The modest grant funding requested in this grant, 

combined with the local match, will ensure a successful startup and long term operation of 

Horizon Air service at Modesto.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 9

Location and Population

Modesto has a prime location in the great California Central Valley. The Modesto MSA has a 

population of 510,385. The MSA has seen population growth of 13.6% since 2000.

Pictured is the MSA and reasonable catchment area of the Modesto airport, including areas 

outside the MSA but for which MOD is the closest airport.

The major airports of Sacramento, Oakland and San Jose may appear to be close by on the 

map. However the famous California freeway congestion means that is only true at 2 am. Also, 

driving to Bay Area airports means traversing the the narrow I-580 corridor over the high terrain 

that seperates the Central Valley from the Bay area. This means that while Mapquest may say its 

under two hours drive to any of these airports no Californian allows less than 2:30 just to get to 

the Sacramento, Oakland or San Jose airports during the day and most particularly during rush 

hours. 

SMF

OAK

SJC
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 10

The Modesto MSA population does not do justice to the true population of the Modesto area.

Over 627,000 Californians live within the 30 minute drive radius illustrated on the map above.

Current Air Service

Modesto is the largest city in California with air service from just one airline. SkyWest, operating as 

United Express, offers Modesto five daily flights to the United Airlines hub at San Francisco with 

EMB-120 turboprop equipment.

San Francisco is a congested and delay prone airport. In both 2008 and 2009 SFO ranked 27th

out of the 31 large airports in the country in on-time performance, with only 69% of SFO flights on 

time in 2008 and 73% in 2009. Air Traffic Control (ATC) gate holds and flow control programs are 

common at SFO. Modesto, being a short-haul market, bears the brunt of these delays, both in 

terms of diminished on-time performance due to gate holds or ground stops and due to above 

30 minute drive radius
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 11

average flight cancellations as SkyWest and United attempt to cope with delay situations by 

consolidating flights and cancelling short-haul markets.

This mediocre flight schedule performance at an airport with only one airline further diminishes 

the utility of the airport for Modesto area residents. The extent of ATC delays creates uncertainty 

among Modesto area travelers, especially business travelers for whom on-time and schedule 

completion are essential factors when choosing among air travel options. 

The chart illustrates Modesto capacity and traffic performance for the past five calendar years. 

Modesto capacity and traffic grew significantly in 2006 and 2007 due to SkyWest inaugurating 

Modesto – Los Angeles service to complement the existing SFO flights.

The Los Angeles flights were a load factor success, running nearly 60% full with that calculation 

assuming a 30 seat capacity. However, the EMB-120 could only carry about 27 passengers per 

flight on the longer LAX segment; therefore the true load factor was about 65% or 66%.

However, the sharp rise in fuel costs that plagued the airline industry in late 2007 and during 2008 

forced SkyWest to end LAX service; the longer flights (90 minutes vs. 35 to 40 for SFO) simply 

burned too much costly fuel.

Year Flights Change Onboard Change Seats Change Load Factor

2005 2,682 34,997 80,460 43.5%

2006 4,455 66.1% 69,684 99.1% 133,650 66.1% 55.4%

2007 5,923 33.0% 95,711 37.4% 177,660 32.9% 56.5%

2008 4,485 -24.3% 72,398 -24.4% 134,550 -24.3% 53.5%

2009 3,246 -27.6% 49,546 -31.6% 97,380 -27.6% 50.9%

Modesto Airline Capacity & Traffic 2005 - 2009

Year Flights Change Onboard Change Seats Change Load Factor

2006 1,496 26,424 44,880 58.8%

2007 2,742 83.3% 48,161 82.3% 82,260 83.3% 58.6%

2008 1,321 -51.8% 21,051 -56.3% 39,630 -51.8% 53.1%

Modesto - LAX Capacity & Traffic 2006 - 2008
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 12

Modesto’s 2005 Small Community Air Service Grant

The LAX service was supported by Modesto’s 2005 Small Community Air Service Development 

Grant. Over 95,636 O&D passengers used the LAX service made possible by this grant award. 

While the unforeseen fuel cost spike coupled with a slowing economy caused the service to be 

terminated, Modesto certainly saw benefit from the LAX flights.

Thus the 2005 Grant was not a failure but merely a victim (like so many other cities and routes in 

2008) of a domestic airline industry contraction of historic proportions, when $150/barrel fuel 

costs drove huge service cutbacks and the worst recession in decades followed on by cutting 

airline traffic and revenue by levels unseen before in the airline industry.

The LAX route’s 95,636 O&D were generated at a cost of $550,000 in DOT grant funds, or $5.75 

per O&D. Furthermore; the remaining Modesto service to SFO grew during the term of the LAX 

flights and has held its own since their end, despite much weaker economic conditions in 2009 

than in 2005, both in Modesto and nationwide.

Note that SkyWest actually increased SFO service during the time of the LAX flights. Even after 

LAX service ended in early 2008 SFO service has held its own at a much higher patronage level 

than before LAX flights began in 2006. Despite a weaker economy in 2009 vs. 2005 the Modesto

– San Francisco route generated 14,549 more O&D (+42%) on only 21% more flights and seats.

Thus the 2005 Grant was a success in terms of economic impact and air service enhancement.

And clearly Modesto area residents do respond to added air service, with both the new route to 

LAX and the expanded SFO service pattern in the same time frame being clear examples.

This new Grant application is for Alaska Air/Horizon for northbound service to Seattle/Portland 

while the 2005 Grant is for SkyWest for southbound service to Los Angeles. 

Year Flights Change Onboard Change Seats Change Load Factor

2005 2,682 34,997 80,460 43.5%

2006 2,959 10.3% 43,260 23.6% 88,770 10.3% 48.7%

2007 3,181 7.5% 47,550 9.9% 95,400 7.5% 49.8%

2008 3,164 -0.5% 51,347 8.0% 94,920 -0.5% 54.1%

2009 3,246 2.6% 49,546 -3.5% 97,380 2.6% 50.9%

Modesto - SFO Capacity & Traffic 2005 - 2009
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 13

Modesto Traffic Leakage Based on Population

Although the Modesto City-County Airport catchment area represents a large proportion of the 

population of the larger region, the Airport does not retain the number of passengers equal to its 

share of the regional population. In other words, the Airport is leaking a large percentage of its 

passengers to other airports – even when those airports are not particularly close.

The Modesto MSA has a population of over 510,000. The larger region comprised of the metro 

areas of Sacramento, Stockton, and Merced has a current population of nearly 3,900,000. 

Modesto’s share of the regional population is 13%.

In many markets, an Airport draws a number of passengers proportional to its overall population 

in the region. If that were the case in the Modesto market, one could reasonably expect the 

Airport to retain about 13% of the total passengers using all four airports in the larger region. 

Sacramento (SMF) 2,417,404 62.8%

Stockton (SCK) 672,388 17.5%

Modesto (MOD) 510,694 13.3%

Merced (MCE) 246,117 6.4%

Population Share

SCK MOD

SMF

MCE

Regional Population

Source: US Census Share of Population of Combined MOD/MCE/SCK/SMF Catchment
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 14

However, in the case of Modesto, the Modesto City-County Airport does not retain anywhere 

close to 13% of the region’s passengers.

While the Modesto metro area is home to 13% of the region’s total residents, its airport retains less 

than 1% of the region’s total origin and destination passengers. In the region, Modesto has the 

second lowest share of passenger retention of any airport. In 2009, the Modesto City-County 

Airport saw a total of 49,546 origin and destination passengers. If the Airport had been able to 

retain the number of regional passengers proportional to its share of population in the region, it 

would have been used by another 1.2 million passengers. In effect, the Modesto City-County 

Airport “leaked” these passengers to other airports in the region – a leakage rate of more than 

1,600%. The bottom line is that the Modesto City-County Airport only retains a tiny fraction of the 

passengers that should be expected based on its share of the regional population.

Share of O&D Share of

Population Population Traffic O&D Traffic

Sacramento 2,417,404 62.9% 8,202,300 98.71%

Stockton 672,388 17.5% 55,390 0.67%

Modesto 510,385 13.3% 49,546 0.60%

Merced 246,117 6.4% 2,010 0.02%

Total 3,846,294 8,309,246

MODESTO POPULATION SHARE VS. O&D PASSENGER SHARE
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 15

Modesto Traffic Leakage Based on Economic Output

Another way of determining passenger leakage from the Modesto market to other airports in the 

region is by comparing the economy of Modesto to the economies of the nearest three cities 

with commercially-served airports. The easiest way to gauge each catchment area’s 

contribution to the economy of the region is to compare the gross metropolitan products (GMP) 

of each. A GMP is much like a gross national product – an overall gauge of economic activity in 

an area in dollars earned.

The United States Council of Mayors reports that the Modesto metro area produced a GMP of 

$15.1 billion in 2009, which represented 11.1% of the total gross regional product (GRP) of the 

area including Sacramento, Stockton, and Merced.

Sacramento generated the largest portion of the GRP, with $96.6 billion, or 70.7%, while Stockton 

produced a GMP of $19.2 billion – good for 14.1% of the GRP.

Sources: United States Council of Mayors, June 2008

Sacramento (SMF) $96.6 Billion 70.7%

Stockton (SCK) $19.2 Billion 14.1%

Modesto (MOD) $15.1 Billion 11.1%

Merced (MCE) $5.7 Billion 4.2%

SCK MOD

SMF

MCE

Gross Metropolitan Product (GMP)

GMP Share
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 16

Despite producing 11% of the total gross regional product (GRP), the Modesto City-County 

Airport retains just 0.6% of the region’s total origin and destination passengers. In the region, 

Modesto has the lowest share of passenger retention relative to its gross metro product (GMP), 

of any airport. 

In 2009, the Modesto City-County Airport generated a total of 49,546 origin and destination 

passengers. If the Airport had been able to retain the number of regional passengers 

proportional to its share of the GRP, it would have been used by another 1,00,000+ passengers. 

In effect, the Modesto City-County Airport “leaked” these passengers to other airports in the 

region – a leakage rate topping 1300%. The Airport only retains a small fraction of the 

passengers that should be expected based on its share of the gross regional product.

Share of O&D Share of

GMP GMP Traffic O&D Traffic

Sacramento $96.6 Billion 70.9% 8,202,300 98.71%

Stockton $19.2 Billion 14.0% 55,390 0.67%

Modesto $15.1 Billion 11.0% 49,546 0.60%

Merced $5.7 Billion 4.1% 2,010 0.02%

Total $136.6 Billion 8,309,246

GROSS METROPOLITAN PRODUCT SHARE VS. O&D PASSENGER SHARE
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 17

Availability of Alternate Airports

Other than Modesto, air service options are limited in the Central Valley between Fresno and 

Sacramento.

Merced is less than 45 minutes drive south along Highway 99. Merced has limited B1900D 

Essential Air Service to Las Vegas and Ontario, which would be completely un-impacted by the 

Grant supported new north bound service at Modesto.

Stockton is 30 minutes north along Highway 99. Stockton has Allegiant Air less than daily service 

to Las Vegas and Long Beach. As with Merced, this existing service goes in the opposite 

direction of the proposed Grant supported new service at Modesto and neither service would 

impact the other.

Nearby Airports in the Modesto Market

Most Modesto traffic leakage is to Sacramento, officially at 1:40 minute drive, or over to the Bay 

area airports of Oakland or San Jose. Officially Oakland is a 1:30 drive and San Jose a 1:45 drive 

but Californians know to allow more time due to Bay Area freeway congestion.

SFO is over a two hour drive in uncongested times and can be much more during peak traffic 

times.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 18

Modesto’s Air Service Needs and Deficiencies

Modesto is the largest city in California with air service from only one carrier. It is one of the most 

underserved markets in the nation, with just 0.19 available seats per capita, a stunning 2,800% 

fewer than the national average of 5.59 seats per capita.

Available Seats Per Capita: 2009

Modesto air service is a fraction of that at Santa Rosa and Salinas/Monterey despite Modesto 

having a significantly larger population. Modesto service also pales by comparison to larger 

Bakersfield and Fresno as well as by comparison to the group average.

Every other city in the peer group has service to multiple hubs while Modesto is not only a one 

carrier market but also a one hub market, and that hub is delay-prone SFO. Modesto’s air 

service deficiency is a lack of a second carrier, a second hub and adequate frequency and 

capacity to meet the air travel needs of its significant population.

1.40

1.38

0.56

0.43

0.19

0.00 0.25 0.50 0.75 1.00 1.25 1.50

Fresno

Monterey

Santa Rosa

Bakersfield

Modesto

MSA Nonstop 2009 Capacity

Airport Population Airlines Routes Capacity Per Capita

Modesto 510,385 1 1 97,380 0.19

Fresno 915,267 6 9 1,356,211 1.48

Bakersfield 807,407 2 4 314,064 0.39

Santa Rosa 472,102 1 4 266,493 0.56

Salinas/MRY 410,370 5 6 598,751 1.46

Group Average 623,106 3 5 526,580 0.85

MODESTO AIR SERVICE COMPARED TO PEER AIRPORTS
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 19

Modesto’s Air Fares

Modesto’s reported average air fares in the DOT’s quarterly 10% sample of airline traffic and 

fares has been inaccurate since 2006. As is the case in many smaller cities the 10% sample 

reporting relationship between market carrier SkyWest and brand carrier United is such that 

Modesto average fares are significantly under reported.

The chart below shows Modesto DOT reported domestic average fare on the brown line. Note 

the sharp drop in average fare starting in 2006. In green is the projected actual Modesto 

domestic average fare, based on the trend line of market average fare for nearby airports 

Fresno, Sacramento, Oakland and San Jose. This trend line shows a much more logical 

progression of Modesto average fares. Certainly the DOT appreciates that SkyWest would not 

have remained in Modesto, and certainly would not have experimented with expanded service 

to Los Angeles and added and retained flights to San Francisco in the 2006 – 2009 period if the 

average fare, before proration with United, was hovering just above $100.

Data Base Products, a well known and established firm that provides automated access to the 

vast DOT airline traffic databases, publishes in its “O&D Operations Manual” for customers (page 

42) a paper explaining the reconciliation of O&D Survey data in market situations where regional 

partners of network carriers report incomplete or “unfared” traffic data.

$187

$157 $172

$108 $108

$136

$122

$189

$186

$196

$182

$0

$50

$100

$150

$200

$250

2003 2004 2005 2006 2007 2008 2009

Average Fare

.

MOD DOT Reported Avg Fare MOD Projected on Peer Group Trend
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 20

The paper says, in part, “In order to include the "Unduplicated Commuter" data with Survey data 

we needed to assign fares to the O&D's. Since fares are not included in the T100 Market data, 

we established a formula which assigns a fare for a given distance. The formula is a yield curve 

which was calibrated from O&D Survey data for codesharing carriers operating in short-haul

markets.”

Using the actual Modesto average fares for 2003 – 2005 and the projected fares from 2006 –

2009 the real picture of the cost of current Modesto air service becomes clear.

This real picture shows Modesto domestic average fares consistently above those of Fresno, the 

only other nearby airport without Low Cost Carrier influence. Modesto fares are some $50 to $60 

or 40% to 60% higher than at the larger airports in the region.

This “true” picture of Modesto average fares, coupled with a clear deficiency of air service in 

terms of carrier options, hub options and flight options, illustrates Modesto’s need for a Small 

Community Grant to assist in the critical task of bringing adequate air service and all its 

economic benefits to the large number of California’s who call Modesto home. 

Modesto’s first grant for service to LAX was a success in drawing significant new traffic to the 

airport and strengthening the core SFO service. Like so many other fledgling air service efforts of 

the 2007 – 2008 timeframe, it simply fell victim to high fuel prices and a weak national economy.

$187

$157

$172

$189 $186

$196

$182

$102 $102

$109

$121

$117

$121

$113

$155 $157

$166

$183 $186

$196

$174

$119 $115 $122

$135

$131

$137

$124

$112 $112

$119

$130

$130

$139

$132

$90

$110

$130

$150

$170

$190

$210

2003 2004 2005 2006 2007 2008 2009

Average Fare

.

Modesto Oakland Fresno San Jose Sacramento
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 21

Modesto’s Air Service Development Efforts 2005 - 2010

The administration of the Modesto City-County Airport has been extremely active in working to 

add air service to the community. A SCASD Grant was awarded a Grant in 2005, which was 

used for the Modesto – Los Angeles service in 2006 – 2008.

The Airport is in constant contact with its incumbent airline and, when appropriate, Modesto 

officials’ journey to the headquarters of prospective new entrant airlines to discuss the Modesto 

market. The Airport has successfully recruited public charter gambling junket flights to the airport.

The Airport also has a wide-ranging current marketing and advertising campaign that is funded 

annually, in an attempt to curb the leakage the Airport experiences. The marketing campaign 

will be geared up significantly if this 2010 Grant application is successful.

2005 April: Business Travel Survey

April: SCASD Application

June: Completed passenger Demand Analysis and Meeing with Horizon in Seattle

August: SCASD Grant award and meeting with Delta Air Lines in Atlanta

December: SkyWest Officials visit Modesto

Airport Marketing Budget $165,816

2006 February: Meeting with SkyWest in St. George

May: SkyWest starts Los Angeles Service with Modesto marketing & advertising support 

Airport Marketing and Air Service Development spending for the year: $63,770 

2007 March: Airport Outreach breakfast for business & industry at Airport Industrial Park 

October: Meeting with US Airways in Phoenix

December: Meeting with SkyWest in St. George, open dialogue with United Sales Rep

Airport Marketing and Air Service Development spending for the year: $54,667 

2008 Through out the year: Travel Agency outreach visits

Ongoing efforts to recruit public charter flights to Laughlin and Wendover, Nevada

May: Meetings with LAX Officials about MOD - LAX service, save LAX service effort begins

June: SkyWest ends LAX service

July: Contacted Great Lakes Airlines about possible MOD service

July: Retained Air Service Consultant, two year contract at risk agreement

August: SCASD application

Airport Marketing and Air Service Development spending for the year: $44,341

2009 March: Airport sponsored Chamber of Commerce and Travel Agency breakfasts 

Ongoing efforts to recruit public charter flights to Laughlin, Nevada

SCASD Grant application

Airport Marketing and Air Service Development spending for the year: $22,715

2010 Successful recruitment of public charter flights to Laughlin and Wendover, Nevada

February: Attended Allegiant Air Conference

June: Attended Jumpstart Conference, presented to six airlines

July: Two meetings with United marketing representatives

SCASD Grant application

Airport Marketing and Air Service Development spending for the year: $68,163

MODESTO AIRPORT AIR SERVICE DEVELOPMENT EFFORTS 2005 -2010
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 22

Primary Objectives of Proposal

Objectives for Program:

• Recruit Modesto’s first competitive airline service in more than a decade

• Reduce airfares through increased competition with a low fare regional carrier

• Make air travel more accessible in California’s central valley

• Increase enplanements in the Modesto market

• Decrease inefficient leakage to other airports in central California

• Increase awareness about local air service

Means to Achieve Objectives:

• Recruit Horizon Air service to the hub in Seattle and/or the hub in Portland

• Seattle is Modesto’s 6th largest domestic market and Portland is Modesto’s 12th

largest market

• The Modesto parties have had extensive discussions with Horizon Air about the 

potential for a Modesto – Portland/Seattle service

• Combine local risk abatement, startup offset and marketing funds with DOT Grant 

funding to provide adequate incentives for the new carrier

Course of Action to Support Means:

• Provide startup cost offsets for the new carrier

• Provide revenue guarantees to ensure the success of the new service

• Provide marketing support to increase general market awareness of new service

• Focused effort to draw local business travel demand to fly locally
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 23

Detailed Explanation of Proposal

Modesto officials have met with Alaska/Horizon Airlines on multiple occasions to discuss the 

Modesto market. A trip to Alaska/Horizon headquarters In Seattle occurred in November of 2009 

and conversations with the carrier took place again at the Jumpstart conference in June of 

2010.

Alaska/Horizon has been successful developing secondary airports and linking major population 

centers up and down the west coast for many years. Examples of west coast secondary markets 

linked to major west coast cities by Horizon are; Santa Barbara – Sacramento, Redding, Medford 

and Redmond – Los Angeles, and Santa Rosa – Los Angeles, Seattle, Portland & Las Vegas.

Route and Service Pattern

Horizon service at Modesto would consist of two round trips per day Q400 turboprop service to 

Portland or Seattle or a combination of both. Seattle service would also offer many online 

connections to other domestic and Canadian cities.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 24

Portland service would offer fewer connections than via Seattle.

Since Alaska/Horizon offers hourly and sometimes half hourly shuttles between Portland and 

Seattle a flight to one of the two cities is a one stop or one stop connection to the other city. 

Current Horizon service at Fresno, for example, consists of two daily nonstops to Seattle and one 

daily nonstop to Portland.

As an example, a one daily trip to Seattle and one daily trip to Portland service pattern would 

mean 1,400 annual flights requiring 2,660 block hours and generating 105,000 annual seats.

Annual Block Annual

Segment Distance Flights Time Blk Hrs Seats ASM

MOD - PDX 556 700 1.65 1,155.0 52,500 29,190,000

MOD - SEA 681 700 2.15 1,505.0 52,500 35,752,500

Total 1,400 1.9 2,660 105,000 64,942,500

MODESTO - SEATTLE/PORTLAND OPERATIONAL STATISTICS

Horizon Air Q400: Two round trips daily
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 25

Traffic and Revenue Estimate

Local Traffic

Nearly 2.7 million O&D passenger trips occur annually between the Modesto region (Modesto, 

Fresno, San Jose, Oakland & Sacramento) and Portland or Seattle.

While the bulk of this travel is between the major airports of both regions Horizon Air has 

demonstrated at cities like Santa Rosa that Q400 nonstop service at reasonable fares can siphon 

off measureable traffic from major central California cities and improve travel options for 

California residents and visitors.

The population of the combined Fresno, Merced, Modesto, Sacramento, Oakland & San Jose 

MSAs plus surrounding areas but excluding the San Francisco MSA is approximately 9,300,000,

The Modesto MSA alone has 510,385 residents, or about 5.5% of the above group total.

City 2009 O&D Avg Fare Revenue

Portland 1,460 $133 $194,180

Seattle 2,090 $126 $263,340

Total 3,550 $129 $457,520

Portland 31,720 $145 $4,599,400

Seattle 61,300 $136 $8,336,800

Total 93,020 $139 $12,936,200

Portland 377,420 $109 $41,138,780

Seattle 396,270 $100 $39,627,000

Total 773,690 $104 $80,765,780

Portland 385,390 $108 $41,622,120

Seattle 647,980 $82 $53,134,360

Total 1,033,370 $92 $94,756,480

Portland 313,200 $115 $36,018,000

Seattle 436,500 $99 $43,213,500

Total 749,700 $106 $79,231,500

Portland 1,109,190 $111 $123,572,480

Seattle 1,544,140 $94 $144,575,000

Total 2,653,330 $101 $268,147,480

CENTRAL CALIFORNIA AIR TRAVEL METRICS FOR SEA/PDX

Modesto

Fresno

Sacramento

Oakland

San Jose

Group
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 26

The Modesto parties believe that Alaska/Horizon service between Modesto and Portland/Seattle

would capture 2% of the region’s annual total Seattle/Portland O&D traffic, or approximately 

53,067 annual local O&D (72.7 PDEW). Average net fare for this traffic is estimated to be $124, 

which is $20 above the average fare of Sacramento and $15 below the average fare of Fresno 

for the same destinations.

Connect Traffic

Horizon service to Portland and Seattle will generate online connections to more than a dozen 

markets in Washington, Oregon, Idaho and Montana plus Anchorage, Fairbanks and Alaska Air’s 

smaller city network in Alaska. Trans-border International connections would also be made to 

four Canadian cities.

The Horizon Modesto – Seattle/Portland service pattern is forecast to capture 6,152 annual 

connect passengers (8.43 PDEW) at an average Itinerary fare of $229 and an average segment 

fare after proration of $121.

Connect Estimated MOD Horizon Horizon Horizon Itinerary Segment Segment

Market Traffic With AS 2011 Share Traffic Avg Fare Revenue Revenue Fare

Spokane 3,195 40% 1,278 $162 $207,036 $138,714 $109

Anchorage 2,085 90% 1,877 $245 $459,743 $183,897 $98

Pasco 565 40% 226 $192 $43,392 $29,073 $129

Bellingham 515 90% 464 $186 $86,211 $57,761 $125

Wenatchee 510 90% 459 $188 $86,292 $57,816 $126

Yakima 440 40% 176 $196 $34,496 $23,112 $131

Fairbanks 360 90% 324 $273 $88,452 $35,381 $109

Redmond 320 90% 288 $177 $50,976 $34,154 $119

Eugene 275 40% 110 $191 $21,010 $14,077 $128

Kalispell 195 90% 176 $200 $35,100 $23,517 $134

Helena 45 90% 41 $250 $10,125 $6,784 $168

Billings 40 90% 36 $266 $9,576 $6,416 $178

Bozeman 40 90% 36 $278 $10,008 $6,705 $186

Great Falls 20 90% 18 $257 $4,626 $3,099 $172

Alaska Other 450 90% 405 $496 $200,880 $80,352 $198

Canada 600 40% 240 $263 $63,120 $42,290 $176

Total 9,655 64% 6,152 $229 $1,411,043 $743,148 $121

MODESTO - SEATTLE/PORTLAND ESTIMATED CONNECT TRAFFIC
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 27

Total Traffic and Revenue Summary

A Horizon Air two round trip Q400 service from Modesto to Portland & Seattle is estimated to 

generate over 59,000 O&D passengers the first year.

Estimated total revenue would be $8,913,703 and segment revenue, after proration of connect 

revenue, would be $8,218,668. This would equate to $3,090 in segment revenue per block hour.

Depending on fuel costs this would imply a modest first year loss for Horizon Air in the Modesto 

market.

A baseline projection of year two results, accounting for the market maturation process, 

suggests load factor growth to near 60% and revenue growth in the 5% range, not considering 

inflation. This should bring the route to breakeven operational performance in year two, barring 

an unforeseen fuel cost spike that cannot be covered by average fare increases.

Service Annual Block Annual

Segment Distance Flights Time Blk Hrs Seats ASM

MOD - PDX 556 700 1.65 1,155.0 52,500 29,190,000

MOD - SEA 681 700 2.15 1,505.0 52,500 35,752,500

Total 1,400 1.9 2,660 105,000 64,942,500

2011 Traffic Itinerary Segment 

Traffic W/ AS Service Avg Fare Revenue Revenue

Local O&D 53,067 $125 $6,633,375 $6,633,375

Ancillary $15 $796,005 $796,005

Online

Connect 6,152 $229 $1,411,043 $743,148

Ancillary $15 $92,280 $46,140

Total 59,219 $8,932,703 $8,218,668

Onboard O&D 59,219

RPM 36,597,342

ASM 64,942,500

Load Factor 56.4%

Total Revenue $8,932,703

Segment Revenue $8,218,668

Revenue/Blk Hour $3,090 $3,244.21

38,427,240

64,942,500

59.2%

$9,379,338

$8,629,601

MODESTO - SEATTLE/PORTLAND TRAFFIC & OPERATIONAL STATISTICS

Horizon Air Q400: Two round trips daily

Operational Summary Projected Year Two Results

62,180
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 28

Modesto Community Information

Modesto is one of the largest cities in the State of California, with a population of 251,000 within 

the city limits. The Modesto MSA is home to more than 515,000 people, making it the fifth largest 

metro area in the State.

Modesto is the gateway to one of the world’s most visited 

national parks – Yosemite, which lies just 106 miles from the 

Modesto City-County Airport. The region has long been a 

tourist magnet, due to its temperate and sunny year 

‘round climate and its close proximity to destinations in the 

Sierra-Nevada Mountains.

The City of Modesto was originally founded as a stop on the rail line connecting Sacramento 

and Los Angeles, in 1870. Today, Modesto is a holdover from its “wild west” days, and in many 

ways, still carries the spirit of a frontier town. Still, the City has not been without major economic 

and cultural developments over the last couple of decades, squarely placing it among 

California’s more robust business climates.

The economy of the Modesto region is anchored by 

recession proof food processing and agriculture, as the 

City carries the role of breadbasket of the west. Large 

food processors in the region produce everything from 

wine to tomatoes, and from chips to chicken. The five 

largest private employers in the region are all major 

food processing companies.

Modesto sits just a short drive to the mountains, the Pacific Ocean, renowned national and state 

parks, and major cities such as San Francisco and Sacramento. The City is truly at the heart of 

California, and its location has long been its greatest asset.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 29

What’s New in Modesto

The Modesto region shows numerous signs of new economic development taking hold. Some of 

the region’s major employers are embarking on major growth plans, adding jobs and boosting 

local revenues.

• The Modesto area’s largest private employer, E&J Gallo Winery, continues the expansion 

of its headquarters and winemaking facilities. With annual sales of $3.5 billion – about 70 

million cases of wine – Gallo is the nation’s largest winemaker. It will continue to add jobs 

as needed, as it looks to expand production to add new markets, primarily in China.

• Kaiser Permanente, with its corporate headquarters nearby in Oakland, CA, continues its 

strong growth in Modesto, and opened a new hospital on the City’s north side in 

October of 2008. Kaiser added 500 new employees at the hospital, including many high 

paying jobs for doctors, nurses, and administrative professionals. The hospital was built in 

response to the need for better health care facilities to the north of Modesto.

• To combat the nationwide declining economy, the resourceful residents and workers of 

Stanislaus County have successfully ventured into several new or expanded industries. 

These include boutique hard liquor production, an emerging specialty cheese market, 

and export of California’s award-winning wine to an emerging Asian market.

• On March 25, 2010, University of California Board of Regents accepted UC-Merced's 10-

year, $1.13 billion capital improvement plan. This undoubtedly signals an enormous 

expansion of not only the school, but the local economy as well. The school, which 

currently enrolls 3,400 students, plans to see that number jump to 11,000 by 2020 and to 

25,000 by 2040. Improvement plans include new research and instruction buildings, 

infrastructure and new student housing. 
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 30

Modesto Economic Overview

Modesto’s most important asset is location. The City, located in Stanislaus County, is in the heart 

of central California, along the I-5 freeway. It has an approximate drive time of 90-minutes from 

Sacramento and 1 hour 53 minutes from San Francisco, but both can be quite a bit longer 

during congested drive times. The region’s business base was initially built on trade, which is still 

an important facet of the economy today.

Easy access from major markets has led a number of large agricultural firms to develop their 

largest operations in and around Modesto. These firms employ more than 10,000 people in the 

region, and provide food, wine, and other agricultural products to people in all 50 states and 

more than 90 foreign countries. Modesto’s connections with all parts of the world – including 

companies on six continents – have never been stronger.

Many say they choose Modesto for the mild climate, the plentiful sunshine, the low cost of living 

compared to other parts of the State, and the quality of life. Local economic development 

agencies have recently recognized the value of small businesses to the economic health of the 

region. Today those agencies offer a number of incentives to lure small businesses to Modesto, 

including free consulting, location scouting, business 

plan development, and market research.

The Stanislaus River Valley Economic Development 

Alliance is also working to expand the number of 

bioscience operations in the region. The Modesto 

area is home to approximately 130 bio-tech related 

businesses, several of which develop new agricultural 

products in support of the large food processing companies in the Valley. The Alliance realizes 

the value of bioscience firms to the health of the agricultural industry, so it’s developed a wideranging recruitment plan that includes outreach, relocation support, grant funding, and other 

monetary incentives to bring biotech jobs to the region.

The Modesto region is home to the operations of no fewer than six Fortune 1000 companies. 

Companies such as Del Monte and Silgan have major operations in the area, while companies 

such as AT & T and Weyerhaeuser have operations that are vital to their company’s 

performance in California.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 31

Top Employers in Modesto, 2009

Firm Employees

Stanislaus County 4,764

E&J Gallo Winery 3,311

Memorial Medical Center 2.682

Modesto Junior College 2,435

Seneca Juices 2,200

Del Monte Foods 2,000

Doctor’s Medical Center 2,000

Foster Farms Processing 1,813

Stanislaus Food Products 1,651

Kaiser Permanente 1,478

City of Modesto 1,400

Wal-Mart 1,244

AT&T/SBC Communications 1,175

Sutter Gould Medical Fnd. 1,005

Save Mart 955

Frito Lay 700

Racor 700

Silgan Containers 440

Foster Farms – Dairy 435

Pacific Southwest Containers 409

Valley Fresh Foods 400

Sysco Foods 400

Hunt-Wesson, Inc. 300

Weyerhaeuser 240

Source: City of Modesto, 2009

Fortune 1,000 Companies with Facilities in Modesto

Firm Rank Revenue Headquarters

Wal-Mart 2 $405.6 Billion Bentonville, AR

AT&T 8 $124 Billion Dallas, TX

Sysco 62 $37.5 Billion Houston, TX

Weyerhaeuser 236 $11.4 Billion Federal Way, WA

Del Monte Foods 582 $3.74 Billion San Francisco, CA

Silgan Holdings 671 $3.12 Billion Stamford, CT

Source: Fortune Magazine, 2009
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 32

Select Company Profiles

E&J Gallo Winery

Based in Modesto, the Ernest and Julio Gallo Winery is the largest exporter 

of California wines, and the largest US exporter of wines. While most of its 

grapes are grown in Sonoma County – to the north of San Francisco and the west of Napa – its 

wines are all created at the winery facility in Modesto. The Gallo Winery is the largest private 

employer in the region, with almost 3,400 current employees. Many of those who work in the 

Modesto headquarters are sales representatives and administrative officers. Gallo produces 70 

million cases of wine each year, with revenues topping $3.5 billion, and markets in 90 countries.

Del Monte

One of the most well known names in food products, Del Monte is a Fortune 1000 

company with more than $3.3 billion in annual revenues. Del Monte operates a 

massive packaging plant and distribution center in Modesto, with 2,000 local 

employees. Del Monte owns a number of well known brands, including Star Kist, Milk Bone, 

Meow Mix, and Nature’s Recipe. The company is headquartered in San Francisco.

Frito Lay

Frito-Lay, a wholly owned subsidiary of Pepsi-Co, is best known for its snack foods 

and had a 2006 sales of $33 billion. The Modesto facility is responsible for 

overseas shipping to military bases and Hawaii operations, as well as 

manufacturing SunChips products for the West Coast. Headquartered in Plano, TX, the company 

employs more than 157,000 people nationally, including more than 700 in Modesto. They have 

nearly 30 other manufacturing plants throughout the US and Canada as well as two in 

Indonesia. Being a subsidiary of Pepsi-Co widens their geographic scope even more and 

increases the need for convenient travel services.

Silgan Containers

Silgan Containers is a division of Silgan holdings, a multinational 

company ranked 671 on the Fortune 1000 list. Silgan’s Modesto 

operation is the world’s largest provider of metal foods packaging materials, which is used to 

can the fruits grown in the Modesto region. Silgan is based in Woodland Hills, California, outside 

of Los Angeles. The company has sales offices in Modesto, Portland (Oregon), Kansas City, 

Chicago, St. Paul, and New York City so enhanced local air service would no doubt benefit their 

business.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 33

Modesto Area Tourism

Tourism to the Modesto area of central California is a year ‘round industry. The region’s climate 

makes it possible to enjoy outdoor activities 12 months out of every year. Moreover, Modesto’s 

central location puts it within a quick drive of the Sierra-Nevada Mountains, the Pacific Ocean, 

and major cities such San Francisco and Sacramento.

California’s central valley has a number of lakes and reservoirs that make it the perfect location 

for boating, kayaking, fishing, and hiking. The region’s beautiful 

scenery draws hundreds of thousands for camping and hunting trips. 

Modesto is also the closest major city to Yosemite National Park –

one of the most visited national parks in the country.

Modesto is also a cultural center for the central valley. As the 

birthplace of film director George Lucas, the City draws tens of 

thousands a visitors a year for a huge “Graffiti Month” festival in June, 

which includes parades, concerts, and multiple showings of Lucas’ 

classic, “American Graffiti.” Lucas is also well known for his Star War 

series, and the Indiana Jones series.

The Modesto area is also part of the region’s thriving wine tourism industry. Home not only to 

Gallo Wineries, the nation’s largest winery, this area can also boast Bronco Wine (3rd largest) and 

Delicato/DFV Wine (5th largest). Wine tourism provides a financial boost to the whole community 

by increasing revenues for stores, restaurants, hotels and all of the employees who work in those 

establishments. A recent study commissioned by the Wine Institute shows that the California 

wine industry has a $51.8 billion economic impact on the state.

As the heart of the agricultural economy of the western US, Modesto is famed for its farmers 

markets and farm tours. Many come to the valley during each season for various harvests, to 

buy fresh fruit and veggies, and, of course, to taste the region’s world famous wines.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 34

Yosemite National Park

Located just 110 miles from the Modesto City-County Airport, 

Yosemite National Park draws more than 3.5 million visitors 

each year, making it one of the most visited national parks in 

the US, and one of the most visited attractions in California. 

Yosemite is best known for its mountain vistas, including famed 

“half dome,” which sits squarely within the Sierra-Nevada 

Range. Modesto is the closest major city to the Park, and the Airport is the closest gateway for 

Park visitors.

Modesto Reservoir

A 30 minute drive to the east of the City of Modesto, Modesto 

Reservoir is a huge lake created by a dam. The lake provides much 

of the valley’s water used for agricultural purposes. The reservoir 

boasts 31 miles of shoreline, has a number of lakes and a surface area 

of 2,800 acres. It is a major destination for boaters, fishermen, water skiers, and campers.

George Lucas Plaza

Located at an area of Modesto called “Five Points,” where five major 

streets all come together, George Lucas Plaza was named in honor of the 

famed film director who created the “Star Wars” saga. Lucas is from the 

area, and comes back each July for a festival in his name. The Plaza is an 

attraction that draws tens of thousands of “Star Wars” fans each year. It 

features a sculpture from a famous scene in Lucas’ “American Graffiti.”

Gallo Center for the Arts

A showplace for downtown Modesto, the Gallo Center for the 

Arts opened, after years of planning, in the fall of 2007. One of 

the most important downtown projects in decades, the Gallo 

Center fills the community’s need for a performing arts center 

and a premier civic center complex. The Center features a pair 

of theatres, one seating more than 1,200 people for music and 

theatrical arts performances. The Gallo Center also generates hundreds of airline trips per year 

by inbound performers from around the world.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 35

Higher Education in Modesto

The Modesto area is home to almost 20,000 full-time college and university students enrolled at a 

pair of regional institutions. California State University has a campus in nearby Turlock, enrolling 

more than 6,000 full-time undergraduates. Modesto Junior College has a campus within the city, 

which is one of the largest two-year institutions in the State of California, enrolling almost 13,000 

full-time students.

Higher Education Enrollment in Modesto

Institution Enrollment

California State University, Stanislaus 8,374

Kaplan College 305

Modesto Junior College 13,467

San Joaquin Valley College 380

Total Enrollment, Fall 2009: 22,526

California State University, Stanislaus

Ranked by US News and World Report as one of the top ten public universities 

in the west that offers master’s degree level instruction; California State 

University, Stanislaus is the largest major university in the Modesto area. The 

school has also been ranked as a “best buy” by the same publication for 

seven years running. The University offers undergraduate programs in 34 

majors, and master’s degree programs in 18 more fields of study. The University’s athletic teams 

compete in the NCAA’s Division II.

Modesto Junior College

The oldest community college in the State of California, Modesto Junior College 

has long been a pioneer in transitional education, boasting the nation’s top 

transfer rate to four-year colleges and universities. The college offers dozens of 

programs of study for almost 13,000 current full-time students and thousands more part-time 

students. Among the college’s notable alumni is George Lucas, the film director and creator of 

the Star Wars saga.

Additionally, the surrounding areas are home to many other institutions of higher learning, 

including University of the Pacific, CSU-Stanislaus, Humphreys College and San Joaquin College

in Stockton; Columbia Community College in Sonora and UC-Merced in Merced.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 36

A Strategic Plan for Success

The new service to Los Angeles in 2006 – 2008 drew very significant passenger traffic and even 

strengthened the incumbent San Francisco service. By any measure this Grant supported service 

was a success but then became a victim of the unprecedented airline industry turmoil of 2008, 

where fuel prices soared to historic levels and then nationwide traffic and revenue declined by 

historic amounts, all in the same year.

The Modesto parties are determined to gain the same huge growth in market traffic with the 

proposed Seattle/Portland service as was accomplished with the Los Angeles service. The 

Modesto parties are also determined to work with Horizon Air to ensure that the new service is 

structured and supported in such a way to be able to survive all but the most extreme economic 

shocks that may occur in the next few years.

Funding Breakdown

The Grant request is for $500,000 in funding, matched by $25,000 in local, non-airport cash and 

$25,000 in Airport marketing and promotional funding. In addition the Airport will offer the new 

airline $124,300 in airport related first year fee and rental waivers and local businesses will 

contribute $41,000 of in-kind support. This makes for a total Grant funding of $550,000 in cash,

$124,300 of airport in-kind and $41,000 in community in-kind for a total of $715,300 in total new 

service incentives. Funding expenditures of cash funding would then occur in a ratio of 90% DOT 

and 10% Modesto, if a full Grant award is made by the Department.

Target Market for New Service & Marketing and Promotional Plan Outline

The Modesto parties recognizes the importance of well funded marketing and promotion for the 

new service, especially since a key to success will be diversion of existing area travel demand 

from driving to other airports to use of the local airport and the new air service.

Allocation Percent

Service Risk Abatement $450,000 82%

Marketing & Promotion $75,000 14%

Start-up Offset $25,000 4%

Total $550,000

GRANT FUNDING BREAKDOWN
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 37

Fortunately overall media costs are modest in the Modesto area and the airport, in close 

coordination with the new carrier, anticipates being able to run an aggressive and sustained 

marketing effort using the $75,000 marketing and promotional Grant allocation,

As the Modesto Community Information section has illustrated, Modesto and the surrounding 

region has a large population, a growing agricultural business sector, a booming wine industry 

and significant economic activity in the health care and education sectors.

This diverse economy already generates significant business related travel and DOT data clearly 

shows that airports around Modesto generate nearly 2.7 million O&D trips to and from Portland 

and Seattle. Furthermore, the large population of the Modesto area also generates significant 

leisure travel to and from the Seattle and Portland region.

The aggressive and multi-media marketing and promotional plan for supporting new Modesto 

air service will focus on four key travel sectors; local corporate travel, local leisure travel, inbound 

business travel and inbound leisure travel.

The Alaska/Horizon brand brings significant marketplace brand power to the efforts to promote 

new Modesto air service. Alaska/Horizon has frequent flyer partnerships with both Delta and Local Radio Local newspaper Local Billboards Airport Email Blasts Local Corporate Travel Departments Local Travel Agencies Alaska/Horizon Corporate Sales Alaska/Horizon Vacations

Local Business X X X X X X X

Local Leisure X X X X X

Inbound Business X X

Inbound Leisure X

Travel Sector

Media Venue

Modesto Marketing Plan 

Overview
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 38

American Airlines, meaning that Modesto area residents can earn frequent flyer miles for either 

airline on a Horizon flight to Seattle or Portland.

The Alaska Airlines brand is the preferred airline brand in the northwest and this provides 

automatic market identity for Modesto with Washington and Oregon residents considering travel 

to the California central valley.

Startup Cost Offsets

The Airport proposes to use an estimated $25,000 of the Grant funding provided under this 

proposal to pay for start-up costs in support of new service introductions. Money will be 

reimbursed to the new carrier as invoices are submitted detailing the work performed to offset 

the acquisition of necessary equipment to begin service (items include carts, tugs, power units, 

computer equipment, cabling, software, etc.).

Revenue Guarantee

The Airport proposes to make available at least $450,000 in funds for a revenue guarantee to the 

new carrier, to cover start-up losses that may occur during the first twelve months of service. 

Subject to negotiation, payments will be made to the new carrier quarterly, when income 

derived from passengers and cargo is less than agreed expenses on the route. Revenue 

generated that exceeds expenses will be carried forward and tapped before any grant funds 

are used.

Additional Costs

As part of this program, the Airport understands that additional expenses will be incurred, such 

as monitoring the results of the program and reporting those results back to the US DOT. In 

addition, Modesto City-County Airport expects to incur some expenses in the recruitment of a 

new airline. These additional costs will come from the revenue guarantee portion of the funding.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 39

Public/Private Partnership

The Modesto parties consist of Modesto City-County Airport, the Airport Advisory Committee, the

Modesto Air Service Task Force, the City of Modesto, Stanislaus County and the Stanislaus 

Business Alliance.

The Stanislaus Business Alliance consists of 54 members and represents all sectors of the Modesto 

area economy. The Alliance provides a number of in-kind services. Alliance funding will commit 

to a program of viral marketing through e-mail blasts to all members and word-of-mouth 

advertising. The Alliance also contributes mailers to area businesses explaining the benefits of 

new and additional air service.

All Partnership members recognize the importance of improved Modesto air service to local 

economic health and growth.

In-kind Service from the Community

The following organizations will help promote the new service by donation of in-kind assistance 

through their various membership groups. These donations, although valuable, do not have an 

assigned dollar value.

• Stanislaus Business Alliance

• Modesto Chamber of Commerce

• City of Modesto

• Modesto Airport Advisory Committee

• Stanislaus County Economic Development Corporation
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 40

Grant Implementation Milestones, Timeline & Monitoring

Grant Milestones and Timeline

Modesto successfully implemented and monitored its 2005 Grant. That experience ensures that 

the Airport and the local Public/Private Partnership are well aware of the responsibilities related 

to a successful Grant implementation and monitoring process.

The above timeline for Grant implementation represents a best case scenario. However the 

timeline sequence is accurate and can be transferred to a later date range should there be a 

delay in Grant award or in gaining a new service agreement with Horizon Airlines.

Success in Grant implementation is most clearly defined by the traffic and revenue results of new 

service and the resulting need for risk abatement funding to cover any startup phase economic 

shortfall. A sub set of the success of meeting the traffic and revenue goals outlined in this Grant 

application or as modified in the agreement with the carrier is the success of the marketing and 

promotional efforts. Note that the timeline calls for constant and ongoing evaluation of the 

marketing effort, based on actual traffic data, onboard traffic profile and advance bookings 

data, all of which will be contractually provided by the carrier to the Modesto parties.

MODESTO GRANT TIMELINE WITH MILESTONES

Date Event Status

Aug, 2010 Grant Application Done

Sept, 2010 Letters of support

Q4 2010 Receive Grant Award

Jan, 2011 Meet with Horizon Air

Q1 2011 Air service agreement with Horizon

Q1 2011 Announce service

Q1 2011 Begin quarterly DOT Grant status reports

Q2 2011 Begin advertising 60 days out

Q2 2011 New service kickoff

Q2 2011 Evaluate first 30 days & booking curve

Q3 2011 Refine marketing program based on route performance

Q4 2011 Renew marketing program, targeting winter bookings 

Q1 2012 Evaluate first six months of service 

Q1 2012 Adjust marketing and service as needed

Indicates Milestone
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 41

Financial Controls and Ensuring the Proper Use of DOT and Local Funds 

As the sponsor, the Modesto City-County Airport will be the responsible party for all fiscal matters 

and DOT reporting requirements. The Airport is established as a division of the City of Modesto’s 

Department of Public Works, which is a public governing body. As a public entity the DOT can 

be assured that proper financial controls are in place to guarantee that the DOT’s grant and 

matching local funds will be used in accordance with any Grant award agreement. The Airport 

understands that the grant is a reimbursable grant, meaning the Airport is responsible for 

program expenditures and will submit invoices to the DOT for reimbursement, based on a 

percentage of the total grant request.

Return on Investment

Modesto used its first Grant in a very cost effective manner, generating high volumes of new 

passengers to Los Angeles. Furthermore while the Los Angeles service was in effect and even 

after it ended SkyWest added and retained flights to San Francisco and SFO traffic today is 

higher than it was prior to the Los Angeles service sequence, despite a much weaker economy 

and demand for air travel.

The Airport has developed a cost effective and achievable strategy to add new service, 

increase enplanements, and lower airfares at the airport. The proposal uses proven methods of 

achieving air service improvements, allowing the DOT to be comfortable with choosing this 

proposal. The increased competition, and access to lower airfares with increased competition, 

by adding service on a new airline, is in line with the major goals of the Small Community Air 

Service Development Program. 

Achieving Self Sustaining Operations

The new service is forecast to achieve breakeven during the second year of operation and 

profitable status thru natural market growth and maturity during the third year of operation. 

Having seen the Los Angeles service succeed so well in terms of traffic and revenue generation 

but then be lost to an unprecedented spike in fuel prices and unprecedented drop in traffic 

demand during 2008, the Modesto parties are well aware that additional resources may be 

needed during the startup and maturation period of the new service.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 42

The Modesto parties believe that the positive economic impact from this new service will be 

large, with a doubling of Modesto traffic expected from the forecast.

This means that if necessary, the City and County and key private concerns in Modesto will step 

forward with additional incentives and risk abatement funding if the second year service 

requires it. This will only be done after a careful examination of key route performance metrics to 

determine exactly why any shortfall of traffic and revenue is occurring in the second year and 

what precise steps are needed to correct for the shortfall while additional incentives or funding is 

provided.

Alternative Plan

In the unforeseen circumstance that the Airport is unsuccessful in recruiting service on Horizon Air 

before the end of during 2011 or early 2012, the Airport will seek another airline, which currently 

does not serve the Modesto market that can offer service to a competitive hub. 

Other carrier options include but are not limited to; USAirways regional jet service to Phoenix, 

Delta Air Lines regional jet service to Salt Lake City or Frontier Airlines service to Denver.

The Modesto Airport has had meetings with and provided market briefing materials to all three 

of these airlines. While the Horizon Air service option is clearly the best for Modesto at this time 

the domestic airline industry is subject to constant change; mergers, fleet realignments, and 

strategy changes. Thus other options are always being evaluated and will be considered if 

Horizon Air is unable to start Modesto service in a timely fashion over the 2011 – 2012 timeframe. 

Legal Sponsor

The designated legal sponsor for this Grant application and eventual Grant award is;

Mr. Jerome Thiele

Airport Manager, Modesto City-County Airport

617 Airport Way

Modesto, California 95345

Ph. 209 577 5319 Email jthiele@modestogov.com
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 43

Modesto City-County Airport Background

The Modesto City-County Airport has long been a gateway to the central valley of California. It 

began serving the region in 1929, as an outpost on the transcontinental route between San 

Francisco and the east coast. The Airport has been a terminus for United Airlines service, in one 

form or another, for more than 60 years. United launched operations in Modesto in 1946 and its 

brand – through United Express – has never left the market.

The Modesto City-County Airport terminal went through major upgrades in 1991, when it was 

enlarged by almost 9,000 square feet to accommodate additional airline service. Still, the 

fastest growing air service at the Airport since then 1990s has been 

corporate aviation, as Modesto is now the home base for a fleet of 

private jet aircraft valued at $115 million.

The Airport has two parallel runways. The longer runway – used for 

commercial operations and jets – is 5,900 feet in length, offering an ILS (instrument landing 

system) approach for operations in bad weather. Modesto’s secondary parallel runway is 3,400 

feet long, and used primarily for general aviation and private aircraft, so as to keep the streams 

of aircraft separate due to their much different approach speeds. The Airport has facilities 

available immediately for additional air carrier operations, including ticket counter, gate, and 

office space.

Aerial Photo, Modesto City-County Airport
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 44

Comparison of Modesto to Other California Markets

Modesto ranks as the 20th largest air carrier airport in California as measured by domestic O&D 

traffic for the 12 months ended 3/31/2010.

Domestic

Airport O&D Flights Seats

LAX 29,368,940 450,505 56,736,840

SFO 21,473,470 324,338 39,802,115

SAN 14,972,320 179,250 23,124,873

OAK 8,465,420 109,050 14,852,351

SNA 8,407,980 98,909 12,764,845

SMF 8,162,940 104,576 12,989,503

SJC 7,530,600 104,965 12,605,531

ONT 4,597,880 61,750 7,344,475

BUR 4,507,510 60,956 7,433,255

FAT 972,240 29,378 1,619,484

SBA 663,370 27,227 1,186,626

MRY 346,040 13,330 598,987

SBP 217,130 9,091 369,082

ACV 185,830 9,076 385,118

BFL 185,380 7,435 342,272

STS 175,410 3,773 286,538

RDD 93,990 6,082 320,538

SMX 84,060 3,298 140,210

SCK 56,440 414 62,800

MOD 50,340 3,477 104,310

CEC 21,800 2,142 64,260

IYK 21,220 2,072 62,160

MCE 2,408 1,482 28,158

12 months end 3/31/10

Airline

California Airport Summary
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 45

Summary

Modesto is precisely what the Small Community Air Service Grant program was designed for.

Modesto is the largest population center in California with only one airline.

Modesto’s air travel demand leakage rates are off the charts, with only a fraction of local air 

travel demand using the local airport.

Modesto has proven its ability to support new service, with high volumes of traffic using the Los 

Angeles service. 

SkyWest’s decision to pull its Modesto – Los Angeles service does not reflect the reality of the 

route: it drew a record number of passengers and generated record airline revenues. The 

decision to pull the route, instead, reflected the harsh economic realities of 2008 in the airline 

industry. Modesto was, by any measure, successful in supporting its Los Angeles service but lost it 

to unprecedented economic events.

Alaska/Horizon Airlines has a very successful strategy of serving secondary west coast airports 

near large populations on north – south routings involving Seattle and Portland, cities where the 

carrier has significant brand and market strength.

This document outlines a well thought out new service concept and a carefully designed 

strategic plan to successfully implement new Grant supported air service at Modesto.

The new service will add capacity and competition at the largest population center in California 

with only one airline. It will help address clear pricing disparity that Modesto has with nearby 

airports. It will reduce wasteful leakage of traffic on congested freeways to other airports. 

The Modesto City-County Airport meets the requirements of the US DOT under the Small 

Community Air Service Development Program. The Airport and the Modesto Public/Private 

Partnership that assisted with the preparation of this document wish to thank the Department for 

its time in considering this Grant application.
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 46
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 47
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 48
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 49
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 50
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 51
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 52
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 53
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 54
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 55
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 56
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 57
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 58
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 59
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 60
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 61
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 62
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 63
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 64
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 65
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 66
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 67
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 68
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 69
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 70
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 71
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 72
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 73
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 74
 Modesto City-County Airport – Small Community Air Service Development Grant – August 2010 75