The Honorable Anthony Foxx 

Secretary 

United States Department of Transportation 

c/o Office of Aviation Analysis 

1200 New Jersey Avenue SE 

81h Floor, Room W-86-300 

Washington DC 20590 

RE: DOCKET DOT-OST-2014-0113 

Dear Secretary Foxx: 

I am pleased to submit the enclosed Proposal under the 2014 Small Community Air 

Service Development Program on behalf of the citizens of Knoxville, Tennessee and the 

surrounding region. 

Knoxville has historically suffered from high airfares resulting from a lack of significant 

low-fare airline competition at Knoxville McGhee Tyson Airport. The Metropolitan 

Knoxville Airport Authority and our public/ private support organization The Competitive 

Airfare Partnership have crafted a reasonable, realistic plan that will help reduce the 

cost of air travel to and from the East Tennessee region. Our plan will benefit not only 

our local residents, but also countless thousands of business and vacation travelers 

who are either being forced to pay high fares, or are electing not to travel at all due to 

the unreasonable cost. 

We hope the Department will look favorably on our proposal. Thank you for providing 

the help we need to solve our airfare problem. 

Sincerely, 

METROPOLITAN KNOXVILLE AIRPORT AUTHORITY 

Attachment: SCASO Grant Proposal 

McGhee Tyson Airport • P.O. Box 15600 • Knoxvi lle, TN 3 7901 • 865/342-3000 • FAX 865/342-3050 • email: rncghee@tys.org 
Secretary 

United States Depru1ment ofTransportation 

1200 New Jersey Ave SE 

Washington DC 20590 

RE: Docket DOT-OST-2014-0113 

Dear Secretary Foxx: 

In an effort to support Knoxville's growth in regional economic development, the Competitive 

Airfare Partnership (CAP) was launched in 2013. CAP is a public/ private initiative with a goal 

to support the actions of the Metropolitan Knoxville Airport Authority (MKAA) to improve air 

service access by recruiting sustainable low fare service from Knoxville's McGhee Tyson 

Airp011. CAP is a program of the Knoxville Chamber's regional economic development 

program, Innovation Valley, and is recognized as a 50lc(6) organization. 

Since its inception, CAP has been successful in raising funds from multiple city and county 

goYerrunents and the Knoxville region business community. These monies have been dedicated 

to help recruit and provide incentives for low-fare airline service from Knoxville. A CAP 

Advisory Board is established to oversee funds allocation. 

The Competitive Airfare Partnership is pleased to partner with the Metropolitan Knoxville 

Airport Authority in this application for a Small Community Air Service Development Grant. 

The federal funding provided by this program, combined with om significant local matching 

funds, will give us the resources needed to attract and suppm1 new low-fare airline service in 

Knoxville. 

We look forward to working with the Department ofTranspm1ation and the MKAA to 

implement our plan to increase airline competition and bring relief from high airline fares to the 

business and leisme travelling public. 

With regards, 

Mitch Steemod, Chair 

CAP Advisory Board 

Competitive Airfare Partnership 

17 Market Square, #20 1, Knoxville, TN 37902 

Phone: (865) 637-4550 Fax (865)523-2071 

\A/\A/\IIIIrnnV\tiiiPn:::tlcrirfnP rnrn 
All applicants must submit this Summary Information schedule, as the application 

coversheet, a completed standard form SF424 and the full application proposal on 

www.grants.gov. 

For· your preparation convenience, this Summary Information schedule is located at 

http:/ /www.dot.gov/pol icy/aviation-poI icy/small-community-rural-a i r-service/SCA S D P 

A. PROVIDE THE LEGAL SPONSOR AND ITS DUN AND BRADSTREET (D&B) DATA UNIVERSAL 

NUMBERING SYSTEM (DUNS) NUMBER, INCLUDING +4, EMPLOYEE IDENTIFICATION NUMBER 

(EIN) OR TAX ID. Enter Y or N 

Legal Sponsor Name: Metropolitan Knoxville Airport Authority 

Name of Signatory Party for Legal Sponsor: James H. Evans, Jr. 

DUNS Number: 053072831 

EIN/Tax ID: 621035154 

B. LIST THE NAME OF THE COMMUNITY OR CONSORTIUM OF COMMUNITIES APPLYING: 

1. Knoxville, TN 

2. ________________________________________ ___ 

3. 

________________________________________ ___ 

4 .. __________________________________________ __ 

C. PROVIDE THE FULL AIRPORT NAME AND 3-LETTER IAT A AIRPORT CODE FOR THE 

APPLICANT(S) AJRPORT(S) (ONLY PROVIDE CODES FOR THE AIRPORT(S) THAT ARE ACTUALLY 

SEEKING SERVICE). 

1. McGhee Tyson Airport - TYS 2. 

3. 4. 

I Note that the Summary Information does not count against the 20-page limit of the SCASDP application. 
[

D. LIST THE 2-DIGIT CONGRESSIONAL DISTRICT CODE APPLICABLE TO THE SPONSORING 

ORGANIZATION, AND IF A CONSORTIUM, TO EACH PARTICIPATING COMMUNITY. 

1. TN-02 2. 

3. 4. 

E . APPLICANT INFORMATION: (CHECK ALL THAT APPLY) 

[Z] 

D 

0 

Not a Consortium D Interstate Consortium D Intrastate Consortium 

Community currently receives subsidized Essential Air Service 

Community (or Consortium member) previously received a Small Community AilService Development Program Grant 

If previous recipient: Provide year of grant(s): 2003, 2009 · and, 

the text of the grant agr·eement section(s) setting forth the scope of the grant project: 

2003 - From Grant Award (Page 3, Section C, Item 2)- Project goals and objectives 1 ). Increase use of the 

Knoxville airport. 2). Recruit a "low-fare" air carrier to serve Knoxville. 3). Revitalize Knoxville's depressed 

local aviation market. 4). Re-institute low-fare air service provided by AirTran Airways, through revenue 

guarantee or wet-lease of aircraft, $2,000,000. 5). Establish a Travel Bank, $4,000,000. 6). Provide for the 

advertising/marketing of the new air service, $500,000. 

2009 - From Grant Award (Page 3, Section C, Item 2)- Project goals and objectives 1 ). Provide revenue 

'Quarantee and start up costs offsets to a low fare carrier to initiate service at Knoxville McGhee Tyson 

F. PUBLIC/PRIVATE PARTNERSHIPS: (LIST 0RGANIZA TION NAMES) 

PUBLIC PRIVATE 

1. Competitive Airfare Partnership 1. Competitive Airfare Partnership 

2. 2. 

3. 3. 

4. 4. 

5. 5. 
D 

0 

D 

D Regional Service D Surface Transportation [{] Pt·ofessional Set'Vices2 

[{] Other (explain below) 

Reduce local airfares by increasing low fare airline competition at Knoxville McGhee 

Tyson Airport. 

2. FINANCIAL TOOLS TO BE USED: (CHECK ALL THAT APPLY) 

[{] Marketing (including Advertising): promotion of the air service to the public 

[Z] Start-up Cost Offset: offsetting expenses to assist an air service provider in setting up a 

new station and starting new service (for example, ticket counter reconfiguration) 

1ZJ Revenue Guarantee: an agreement with an air service provider setting forth a minimum 

guaranteed profit margin, a portion of which is eligible for reimbursement by the 

community 

[{] Recruitment of Air· Carrier: air service development activities to recruit new air service, 

including expenses for airport marketers to meet with air service providers to make the 

case for new air service 

[{] Fee Waivers: waiver of airport fees, such as landing fees, to encourage new air service; 

counted as in-kind contributions only 

[Z] Ground Handling Fee: reimbursement of expenses for passenger, cabin, and ramp (below 

wing) services provided by third party ground handlers 

0 Travel Bank: travel pledges, or deposited monetary funds, from patticipating parties for 

the purchase of air travel on an air carrier, with defined procedures for the subsequent use 

of the pledges or the deposited funds; counted as in-kind contributions only 

2 "Professional Services" involve a community contracting with a firm to produce a product such as a marketing 

plan, study, air carrier proposal, etc. 
(Z] Full ILS 

[{] Localizer 

[Z] Outer/Middle Marker [{] Published Instrument Approach 

D Other (specify) 

I. PROJECT COST: Do NOT ENTER TEXT IN SHADED AREA Enter Y or N 

LINE DESCRIPTION Sun TOTAL TOTAL AMOUNT 

1 Federal amount requested 950,000 

2 State cash financial contribution 0 

Local cash financial contribution 

3a Airport cash funds 510,000 

3b Non-airport cash funds 940,000 

3 Total local cash funds (3a + 3b) 1450000 

4 TOTAL CASH FUNDING (1+2+3) 2,400,000 

In-Kind conh'ibution 

Sa Airpmt In-Kind contribution** 0 

Sb Other In-Kind contribution** 0 

5 TOTAL IN-KIND CONTRIBUTION 

(Sa+ Sb) 0 

6 TOTAL PROJECT COST (4+5) 2,400,000 

J. IN-KIND CONTRIBUTIONS** 

For funds in lines Sa (Airpmt In-Kind contribution) and Sb (Other In-Kind contribution), please 

describe the source(s) of fund(s) and the value($) of each. 
IZJ c. Program is not covered by E.O. 12372. 

L. Is THE LEAD APPLICANT OR ANY CO-APPLICANTS DELli"'QUENT ON ANY FEDERAL DEBT? 

(IF "YES", PROVIDE EXPLANATION) 

[{] No D Yes (explain) 

APPLICATION CHECKLIST 

INCLUDED? ITEM 

Enter Y or N For Immediate Action 

y Determine Eligibility 

y New Grants.gov users must register with www.grants.gov. 

Existing Grants.gov users must verify existing www.grants.gov account has not expired 

and the Authorized Organization Representative (AOR) is current. 

For Submission bY. 5:00PM EDT on Jull' 31, 2014 

y 

Communities with active SCASDP grants: notify DOT/X50 of intent to terminate 

existing grant in order to be eligible for selection in FY20 14 

y Complete Application for Federal Domestic Assistance (SF424) via www.grants.gov 

y Summary Information schedule complete and used as cover sheet (see Appendix B) 

y Application of up to 20 one-sided pages (excluding any letters from the community or an air carrier showing support for the application), to include: 

y . A description of the community's air service needs or deficiencies. 

y • A strategic plan for meeting those needs under the Small Community Program. 

• A detailed description of the funding necessary for implementation of the y community's project. 

• An explanation of how the proposed project differs from any previous projects y for which the community received SCASDP funds (if applicable). 

y . Designation of a legal sponsor responsible for administering the program . 

y • A motion for confidential treatment (if applicable) - see Appendix D below. 
Docket # DOT -OST -2014-0113 

METROPOLITAN 

KNOXVILLE 

AIRPORT 

AUTHORITY 

DUNS# 05-307-2831 

Congressional District: TN-02 

July 30, 2014 

This application is submitted in conjunction with Knoxville's Motion for Confidential 

Treatment under Rule 12. The location of confidential material is indicated by 

James H. Evans, Jr. 

Vice-President, Marketing & Air Service Development 

Metropolitan Knoxville Airport Authority 

2055 Alcoa Highway, Suite I 

Alcoa, TN 37701 

Phone (865) 342-3012 

Email: jim.evans@tys.org 
The Knoxville Region's Program Goal 

uta expand air service options and to lower aitiares to and from the 

Knoxville & East Tennessee Region for business, government, 

and leisure travelers by recruiting, launching, and marketing new 

- from Knoxville McGhee Tyson Airport, and by pursuing 

additional service to unserved airports from both incumbent 

and other new-entrant low-fare airlines" 

2 
The Metropolitan Knoxville A

po

y (

) 

p

p 

(CAP) are pleased to submit this application for federal grant funds under the 2014 Small 

Community Air Service Development Program to help remedy a significant problem that 

currently is forcing East Tennessee travelers to pay airfares that are significantly-above the 

national average. 

McGhee Tyson Airport (TYS) serves Knoxville and all of East Tennessee. The airport has 

always suffered from average airfares that were significantly-above the national average. In 

fact, in recent years TYS fares have routinely been among the ten highest in America, and 

have been ranked in the top three. Furthermore, TYS fares are higher than those from other 

competing airports located within 200 miles of Knoxville, which has led to a "leakage" 

problem whereby an estimated 300,000 local travelers are electing to make a three to four 

hour drive to the alternate airports to find more affordable airfares. 

High airfares prevent the public from accessing the air transportation system, depress the 

local economy, and stymie economic development efforts. If Knoxville fares are to become 

competitive, the airport must grow the number of affordable-fare markets and flights available 

to the consumer. 

The primary reason for this situation is the lack of year-round sustained service by a 

networked low-fare airline that could bring competitive pricing pressure to the TYS market. 

The MKAA and CAP have historically sought to increase quality low-fare service from TYS 

with limited success. 

In today's economic climate, airlines have been reluctant to add new service without financial 

assistance from the local community. Through this Application, the MKAA and CAP, on 

behalf of the Knoxville Region, seek $950,000 in federal matching funds that will be 

combined with at least $1.45 million in local dollars. The combined $2.4 Million will be used 

to finance marketin initiatives and erati cost offsets for new low-fare se 

opportunities from other airlines may also be a possibility. 

Now, more than ever, new airline service MUST be immediately successful. Airlines will not 

sustain losses on any route. New affordable-fare service added in Knoxville must succeed 

from the onset, or else it will be quickly discontinued. Funding assistance through the SCASD 

Grant Program will allow new Knoxville affordable-fare service to succeed, and will greatlybenefit all segments of the traveling public. 

3 
Table of Contents 

Item Page 

I. Knoxville/ East Tennessee Regional Overview 5 

II. Knoxville's High Airfares 6 

Ill. Knoxville McGhee Tyson Airport Overview 8 

IV. Knoxville's Public/ Private Partnership 11 

V. Knoxville's Eligibility for a 2014 SCASD Grant 11 

VI. Knoxville's Plan to Lower Local Airfares 13 

VII. Funding Request and Budget 14 

VIII. Calendar 16 

IX. Monitoring and Evaluation 17 

X. Summary 18 

4 
~ 

Kentucky 

Tennessee North Carolina 

The region is extremely diverse, in that it is home to major corporations, significant high-tech 

research and development facilities, numerous colleges including a major university, and one 

of the most popular vacation destinations in America. 

The Knoxville Region has been recognized as one of the top-ten places in America to do 

business. The area is home to the headquarters of the Tennessee Valley Authority, a federal 

corporation and the nation's largest power provider. The 950-location Ruby Tuesday 

Restaurant Corporation is also headquartered in the region, as are the Pilot I Flying J 

Corporation and Clayton Homes. Knoxville is home for Scripps Networks and their array of 

television networks including HGTV and The Travel Channel 

Over 12,000 government workers and federal contractors support both the United States 

Department of Energy and Department of Defense at Oak Ridge National Laboratory (ORNL) 

and the Y-12 National Defense Facility in nearby Oak Ridge, TN. The Oak Ridge facilities 

comprise the largest single user of air service from Knoxville McGhee Tyson Airport. 

Knoxville is home to the flagship campus of The University of Tennessee with nearly 50,000 

students and faculty members. Fall means "Football Time in Tennessee" when over 103,000 

fans from all over the country pack Neyland Stadium for every home game. 

Tourism is a major industry in East Tennessee. The Great Smoky Mountains National Park is 

America's most-visited park with nearly 10 million annual guests. The Smoky Mountains have 

led to the development of a significant inbound vacation industry in communities like nearby 

Gatlinburg and Pigeon Forge that attracts an additional 5 million annual visitors to the area. 

It is estimated that less than 2% of current Smoky Mountain visitors utilize the air 

transportation system to reach this popular destination. With affordable airfares, this number 

could grow exponentially. In real numbers, this means that just a 1% increase in air travelers 

equates to 150,000 potential new airline passengers. These visitors would be removed from 

the highway system. 

5 
Airlines and others. Additional area airports include Chattanooga (CHA) 75 miles south, 

Tri-Cities TN (TRI) 110 miles north, Asheville (AVL) 100 miles east, and Greenville/ 

Spartanburg SC (GSP) 183 miles east. 

Passenger leakage from TYS to other airports is a problem. Nearly 20% of potential TYS 

passengers are choosing to take advantage of significantly-lower fares offered from alternate 

airports. 

II. KNOXVILLE'S HIGH AIRFARES 

Knoxville's Fares Are Well-Above the National Average 

Airfares in Knoxville have historically been among the highest in the United States. According 

to the latest BTS report for 102014, Knoxville fares are ranked as the 11th highest in the 

nation. This situation has hurt the local economy, and has been an obstacle to economic 

development initiatives that could bring more jobs to our area. While a concentrated effort to 

increase competition in recent years has resulted in some fare improvement (due in large 

part to seasonal Frontier Airlines service to Denver and the West that began in 201 1 ), 

Knoxville average fares were 13% higher than the national average in 2013, and in the 

1 02014 are 17% above the national average. The following chart illustrates Knoxville fares 

versus those from nearby Nashville, and the national average through 102014: 

BOO 

700 

600 

100 

- U.S. Ave rage (Cu rrent S) 

- U.S. Ave rage (Inflatio n - AdJusted S) 

- Nasfw•lle. TN (Current S) 

NAs h ville. TN (Inflation - Adjust e d S) 

- Kno)(ville. TN (C u rrent :S) 

Knoxville, TN (In fla t ion- Adju sted S) ~ ~ m m ~ m m m m ~ ~ m ~ ~ m m m m m m 

I S9l I~H .,~7 I H. I Hll' lCC~ 2001 lQOl 2001 100>4 2(05 ZQIQ4 l OOJ' ZOOt lOO' 2010 2DII ~012 lOIJ 2014 

NOTE. rnna~A4usted air fares are cala.llated us"'' <k>flafS. Jor lhe year of the most recent rare release. 

SOURCE: Bureau of Transportation statfstk:5 

6 
2013*, Knoxville's average fares were compared to those of 20 similar-sized airports based 

on passenger volume (excluding those in Hawaii and Alaska), along with nearby airports 

Atlanta and Nashville. Knoxville ranked as the 95rd largest airport in America, so the 20 

selected comparison airports include ten that were ranked immediately higher than Knoxville 

in passenger traffic and ten that ranked immediately lower. Key points of this analysis are: 

• Knoxville average fares were higher than 17 of the 20 peer airports surveyed 

• Knoxville fares were 13% higher than those from nearby Atlanta, and 14% higher than 

from nearby Nashville 

Knoxville Average OW Fares vs. Those From Comparable-Sized Airports 

on CY2013 Passengers I Source 8~ Datamine 

W'lll *•••I•l 

85 Des Moines DSM $203.69 7% 

86 Syracuse SYR $213.13 3% 

87 Greeneville/ Sf)arta.1burg GSP $195.60 11% 

88 Portland M E PWM $203.57 8% 

89 Ca nton/ Akron CAK $167.70 24% 

90 Myrtle Beach M YR $119.86 46% 

91 Sanford SFB $68.34 69% 

92 Madison MSN $231.55 -5% 

93 Greensboro GSOI $212.61 3% 

94 Savannah SAV $235.18 -7% 

95 KNOXVILLE TYS $220.17 0% 

96 White Plaines HPN _$202.42 8% 

97 Palm Springs PSP $209.68 5% 

98 Pensacola PNS $216.73 2% 

99 Mesa AZA $80.46 63% 

100 Islip ISP $155.51 29% 

101 Wichita ICT $107.89 51% 

102 Colorado Springs cos $211.42 4% 

103 Harrisburg MDT $222.50 -1% 

104 Burlington BTV $211.37 4% 

105 Fresno FAT $212.00 4% 

6 Atlanta ATL $191.09 13% 

36 Nashville BNA $190.32 14% 

7 
save on their airfares, or else they are not 

flying at all. 

20 

#of 

Markets w/ 1 0 

Lowest 

Avg Fare 

0 

BNA 

•source: Boyd Jnt'l Dataminer 

TYS 

Knoxville Natl Avg Atlanta Nashville 

Average fares in Knoxville's top-20 

competitive origin & destination markets 

were compared to average fares in those 

same markets from nearby Nashville 

(BNA) for 2013. Nashville fares were lower 

than those from Knoxville in 16 of the 20 

markets surveyed. 

Ill. KNOXVILLE MCGHEE TYSON AIRPORT (TYS) OVERVIEW 

.,.. .,,. .._ .. 

-

... . . 

' '- ....... .,.. (~':,.... - - - -

-

' -- I I ' "''"'•' ...... ~· ... ·--· . ~-~- ~ - j- - j • • I • 

TYS is served by six air carriers and/ or their regional affiliates providing 65 daily departures. 

Service is offered to 18 nonstop destinations as shown below: 

Allegiant Air* Sanford, St. Petersburg, Ft. Lauderdale, Punta Gorda 

American Eagle Chicago (ORO), Dallas/ Ft. Worth, New York (LGA) 

Delta & Delta Connection Atlanta, Detroit, Minneapolis, New York (LGA) 

Frontier** Denver, Chicago (MOW) 

United Express Chicago (ORO), Denver, Houston, Newark, Washington (lAD) 

US Airways Express Charlotte, Philadelphia, Washington (DCA) 

*less-than-daily service **Frontier provides seasonal less-than-daily service. MOW service ends 09/14 

8 
Dallas/Ft. Worth DFW 55,320 $426 25.9 

Fort Lauderdale FLL 54,870 $229 15.8 

St. Petersburg PIE 50,580 $109 9.9 

La Guardia LGA 50,550 $377 26.7 

Denver DEN 47,650 $365 14.2 

Philadelphia PHL 40,530 $363 27.9 

Las Veqas LAS 37,480 $411 10.4 

Los Anqeles LAX 37,290 $455 10.5 

San Francisco SFO 36,870 $454 9.5 

Ronald Reaqan National DCA 35,820 $523 54.7 

Punta Gorda PGD 32,780 $115 9.2 

Boston BOS 31,560 $403 20.9 

Orlando Inti MCO 29,050 $406 32.9 

Phoenix PHX 27,410 $385 10.5 

Newark EWR 24,870 $414 29.5 

George Bush Inti IAH 24,830 $553 31.0 

Seattle SEA 24,470 $462 9.8 

Minneapolis MSP 24,140 $397 21.0 

Detroit DTW 22,900 $573 55.0 

San Diego SAN 20,620 $434 10.0 

Dulles lAD 15,890 $498 54.6 

San Antonio SAT 14,800 $442 20.9 

Salt Lake City SLC 14,630 $500 14.1 

Source: Database Products 

TYS Annual Enplanements 

2013 858,991 

2012 876,483 

2011 888,155 

2010 845,055 

9 
Orlando. Following a merger, AirTran's service grew to include flights to both Atlanta and 

New York. Unfortunately, AirTran's inconsistent operational performance, combined with a 

significant competitive response from incumbent TYS airlines led AirTran to withdraw from 

TYS in 2000. 

The AirTran experience taught the community that low-fare service was a "use it or lose if' 

proposition. Knoxville was ready for another chance at low-fare service. 

Independence Air: A True Success Story 

That chance came in 2004 with the launch of Independence Air. l-Air initially entered the 

Knoxville market with nonstop service to Washington, the airport's number one market. 

Independence quickly added nonstop service to Orlando and Tampa. 

Despite another aggressive response from incumbent carriers, the Knoxville community 

rallied behind Independence Air. TYS quickly became one of the carrier's top-performing 

stations. Unfortunately, a poor business plan led to the failure of Independence Air in early 

2006. Nevertheless, Knoxville had proven that the community would now support a newentrant low-fare carrier. 

Knoxville Embraces Allegiant Air 

In late 2006, Allegiant Air began less-than-daily service linking Knoxville with St. Petersburg, 

FL. The new route was immediately very popular among leisure travelers, and led Allegiant to 

add additional flights to Orlando-Sanford, Las Vegas, Fort Lauderdale, and Punta Gorda. 

While the LAS service has been suspended due to high fuel prices, the remaining four leisure 

markets continue to flourish. Knoxville is now one of Allegiant's most-successful airports. The 

success of Allegiant Air proved that the Knoxville market is eager to support low-fare service. 

AirTran Airways Returns to Knoxville 

In June 2009, AirTran Airways returned to Knoxville with less-than-daily service to Orlando. 

The flights performed well, however after acquiring AirTran in 2011, Southwest Airlines 

elected to terminate the limited Orlando service. 

Frontier Airlines Lands in Knoxville in 2011 

After many years of discussions, Frontier Airlines arrived in Knoxville in 2011 with seasonal, 

less-than-daily service to their hub in Denver. The service remains today from April through 

December. Connections are available via Denver to dozens of Western airports. Frontier's 

service has been popular for leisure travelers; however their lack of flight frequency has 

10 
does not provide a true permanent solution to East Tennessee's high fare problem. 

IV. KNOXVILLE'S PUBLIC/ PRIVATE AIR SERVICE PARTNERSHIP 

A public-private airport support organization has operated in the Knoxville Region for over 12 

years. The first support organization East 

Tennesseans for Airfare Competition (ETAC) was 

created in May 2002 by Knoxville regional business 

leaders. In 2013, ETAC's mission was assumed by 

the regional Competitive Airfare Partnership (CAP), 

which is affiliated with the Knoxville Chamber 

C

COMPETITIVE 

ft

AIRFARE PARTNERSH

P 

I P 

Partnership and the Innovation Valley Inc. economic development organization. 

CAP has been very active in the local community, and has successfully raised a significant 

amount of cash from local governments and the private sector that will compose a large 

portion of the local matching funds for Knoxville's 2014 SCASD application. 

CAP's role in this project will be to provide a portion of matching funds for the SCASD grant, 

and to help promote the targeted low-fare airline service in the East Tennessee region. 

V. KNOXVILLE'S ELIGIBILITY FOR A 2014 SCASD GRANT 

Knoxville Meets Both Major Requirements 

The criteria for 2014 SCASD applicants contain two requirements for applicant communities: 

Be served by an airport that was not larger than a Small Hub in 1997, and have 

insufficient service or unreasonably high fares: 

In 1997, TYS was classified as a Small Hub with 727,836 enplanements. Local airfares have 

consistently been above the national average, and have frequently been among the tenhighest in the nation. 

The community should demonstrate a need for grant assistance: 

Airlines are looking to local communities to provide greater levels of marketing support than 

ever before. Advertising in both local communities as well as in destination cities has 

increasingly become the responsibility of the primary airport. The cost of marketing and 

11 
Proposals, and therefore should receive Priority Consideration for approval. Specifically: 

Knoxville airfares are significantly-higher than the national average; 

The Knoxville regional community will provide a portion of the cost of the air service activity 

from local sources other than airport revenues; 

A public-partnership exists in Knoxville that will facilitate air carrier service to the public; 

The assistance will provide benefit to a broad segment of the Knoxville community, including 

the East Tennessee regional business community, the large collection of educational 

institutions in the area, tourism groups, government installations, and other enterprises 

whose affordable access to the national air transportation system is currently limited due to 

high airfares; 

If awarded a grant, the Knoxville community will move forward with its air service program in 

a timely manner. 

Knoxville's 2014 Application is Different From Previous Proposals 

Knoxville has been awarded two SCASD grants in past years. Projects were not completed 

due to unforeseen circumstances. As a result minimal grant funds were expended. 

In 2003, Knoxville received a $500,000 grant that was intended to support low-fare service by 

AirTran Airways through their regional jet affiliate Air Wisconsin. Grant funds were intended to 

pay costs for an AirTran RJ for Knoxville- Atlanta service, plus use additional grant proceeds 

to fund a "travel bank" that would give AirTran guaranteed ticket sales for the new service. 

Shortly after the Knoxville community received the grant award, AirTran discontinued all 

Regional Jet service, and then re-evaluated Knoxville as a candidate for service using their 

larger 717 aircraft. Ultimately, AirTran informed Knoxville that they were not able to add TYS 

service as originally planned. As a result, the grant funds were never used. 

In 2009, Knoxville was awarded a $500,000 SCASD grant. The primary goal was to expand 

AirTran's limited Knoxville-Orlando service to the airline's BWI hub, with a secondary goal of 

recruiting and launching other airline low-fare service to additional unserved airports. 

Shortly after the grant was awarded, AirTran was acquired by Southwest Airlines. This 

unanticipated airline merger was a huge disruption to Knoxville's plan for use of the SCASD 

funds. Southwest elected to eliminate AirTran's limited-frequency flights from numerous small 

airports, including Knoxville. Southwest officials told the Knoxville community that they were 

not able to consider their own TYS-BWI service due to the complexities of merging AirTran 

12 
Note that Knoxville is now in a position to provide significantly more local matching cash for a 

2014 SCASD grant as the result of the fundraising success of our public/private partner 

Competitive Airfare Partnership. Over 60% of the cost of our air service improvement plan will 

be borne by the local community. 

While airline industry consolidation and contraction have reduced the number of potential 

new-entrant carriers, Knoxville continues to recruit additional new service from other 

incumbent and new-entrant airlines. SCASD funds may be used for recruiting, marketing, 

advertising, and risk mitigation programs. 

VI. THE KNOXVILLE REGION'S PLAN TO LOWER LOCAL AIRFARES 

The Metropolitan Knoxville Airport Authority, the Competitive Airfare Partnership, and 

numerous other Knoxville-area civic and government agencies are relentlessly pursuing 

competitive airfares from Knoxville McGhee Tyson Airport that will lower the cost of local air 

travel. As part of this ongoing effort, representatives of the Knoxville region have met with 

incumbent and potential new-entrant carriers seeking the lower airfares that the region 

desperately needs. 

The realities of today's airline operating environment mean that many airlines have curtailed 

growth plans for the immediate future. The Knoxville Region recognizes that attracting new 

low-fare service to TYS will be challenging, and will not happen overnight. Bringing additional 

competitive fares to the Knoxville Region is a marathon ... not a sprint. 

The Knoxville Region also recognizes that any new air service must be self-sustaining. New 

low-fare service must be able to succeed without long-term financial assistance. For this 

reason, the Knoxville region has taken care to pursue only those opportunities that make the 

most sense, and have the greatest chance to succeed. 

It is the goal of the Knoxville Region to not only attract new competitive-fare airline service in 

McGhee Tyson Airport's most-traveled markets, but also to significantly promote the new 

service to insure its success. The Knoxville Region will assist airlines bringing expanded low13 
2. Launch New Service from Incumbent and Other New-Entrant Airlines: 

Knoxville recognizes other opportunities may arise from both incumbent and other newentrant airlines to add low-fare service to unserved airports from TYS. The Region will 

support any new low-fare service that could benefit our community's air travelers. 

VII. KNOXVILLE'S FUNDING REQUEST & BUDGET As a government agency and legal sponsor of this Application, the Metropolitan Knoxville 

Airport Authority (MKAA) seeks $950,000 in federal grant funds. 

These funds will be combined with locally-provided cash generated by our public-private 

support group Competitive Airfare Partnership (CAP), as well as airport-funded cash 

incentives as to yield $2.4 Million in marketing incentives that will be used to attract increased 

low-fare airline service to the Knoxville community. 

Airport funds will come from non-airfield revenues such as concessions, parking, etc. 

Knoxville's air service development funding plan is as follows: 

Source Cash %of Total Comments 

SCASD Grant $950,000 39.6% SCASD Grant Funds 

Local Funds $1,450,000 60.4% MKAA/ CAP Cash 

In-Kind Services none 

TOTAL $2,400,000 100% 

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Development Grant funds, combined with $1.45 Million in locally-generated monies, to 

produce a sizeable fund of $2.4 Million that will be used to market and advertise targeted 

new airline service, and to help offset airport startup costs. 95% of the total funds will be 

used for direct support of the new airline flights. 

Knoxville's proposed program budget* is as follows: 

Marketing & Promotion Expenses (65% of total) 

The new low-fare air service will be advertised & promoted using media 

such as print, radio, TV, billboard, digital, and social media. Costs 

include ad agency fees and creative expenses. Programs will 

begin 3-4 months prior to service launch, and will continue as needed. 

Airport Operating Costs & Fee Waivers (30% of Total) 

Funds will be used to offset costs associated with opening and 

operating the TYS airport station, and will include offsetting 

airport landing fees, ground handling charges, etc. Cost offsets 

will be valid for an introductory period not to exceed one year. 

Recruiting Costs, Marketing Plans, Administration, & Fees (5% of Total) 

Funds will be used for developing marketing plans for 

the new affordable-fare service, conducting research, air service consultant fees, 

travel to meet with airlines, production of marketing materials for these meetings, 

airline site visits, & offsetting of any other administrative expenses. 

$1,560,000 

$720,000 

$120,000 

T 0 T A L............................. .......... .......... ............................ ........................ ..... $2,400,000 

*Funding plans and dollar amounts are subject to change based on the specific needs of the 

low-fare carrier bringing competitive fares to Knoxville. 

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Knoxville's calendar for implementing our initiatives is shown 

below, but is subject to change based on the state of the airline industry. 

Dialogue With Targeted Airlines 

Response to Airline Feedback/ Negotiat 

Status Reporting 

Service Begins 

Months Before/ l Months After Service Launch 

Status Reporting 

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reports to the DOT. MKAA will maintain an open dialogue with low-fare carriers to ascertain 

potential issues, and to work to resolve those issues before they threaten the success of new 

service. 

Reports will be provided detailing the status of both the implementation of our plan, as well as 

the success of the new air service. 

indicators will include 

• Passenger bookings (both advance and actual) 

• Airline load factors (all carriers) 

• Carrier market share I seat share (all carriers) 

• Change in TYS average fares 

• Air carrier revenue performance & profitability (if available) 

• TYS fares vs. fares from competing airports 

• TYS fares vs. fares from peer airports 

• Change in passenger leakage 

If Things Don't Work Out.. .... 

While the Knoxville Region has every intent of producing a successful program that will 

benefit the citizens of our region through lower airfares, the realities of today's airline 

environment dictate the possibility the air service initiatives contained herein may not 

succeed in a timely manner. Should this occur, then the Metropolitan Knoxville Airport 

Authority and its partners understand that grants funds may not be fully utilized. 

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• When given the opportunity to use a low-fare airline flying from Knoxville, local 

residents have demonstrated that they will support the low-fare provider. 

• Low-fare airlines have stated that financial incentives play a critical role in their 

selection of new markets. 

• The Knoxville Region has set forth a solid action plan that can significantlyimprove the high-fare problem by helping bring additional competitive pricing to 

Knoxville McGhee Tyson Airport. The plan is sponsored by the Metropolitan 

Knoxville Airport Authority (a government agency), and the Competitive Airfare 

Partnership (a public/private partnership support group). 

• The Knoxville Region will also pursue other opportunities for low-fare service to 

unserved airports from incumbent airlines, as well as from other potential newentrant carriers. It is a certainty that any expanded low-fare service will require 

incentives to offset financial risk. 

• The cost of funding marketing and advertising programs for a new low-fare 

airline iss nifica articul when programs are run in major airline focus 

cities such These costs are well beyond the financial 

means of the Knoxville Region partners. 

• The Department of Transportation will play a key role in the success of 

Knoxville's air service plan and the reduction of East Tennessee airfares by 

awarding Knoxville with a Small Community Air Service Development Grant that 

will help fund marketing programs and cost offsets for expanded low-fare airline 

service at McGhee Tyson Airport. 

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