## Dun & Brad street DUNS Number : 116119731 Tax Identification Number: 456002069W Two

- Digit Congres sional District Code: None ( At

- Large Representation)



# Hector International Airport Fargo, North Dakota

Proposal u nder the Small Community Air Service Development Program

Docket DOT

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# FARHector International Airport; Fargo, North Dakota

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

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## TABLE OF CONTENTS

INTRODUCTORY LETTER

................................ ................................ ................................ .................... 4
EXECUTIVE SUMMARY

................................ ................................ ................................ ........................ 5
AIR SERVICE OVERVIEW

................................ ................................ ................................ ..................... 7
Catchment Area

................................ ................................ ................................ ................................ ..................... 7 Alternate Airports

................................ ................................ ................................ ................................ ................... 8 Fargo's Existing Air Service

................................ ................................ ................................ ................................ ... 9 Air Service Development E fforts

................................ ................................ ................................ .......................... 11 2005 Small Community Air Service Development Grant

................................ ................................ ..................... 11 Marketing and Promotion of Fargo's Air Service

................................ ................................ ................................ . 12 

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

................................ ............................. 13 Capacity Trends

................................ ................................ ................................ ................................ ................... 13 Frontier Discontinued Fargo Service in Early 2010

................................ ................................ ............................. 15
Traffic Tre nds

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

................................ ................................ ................................ .............. 18
Domestic Fare Trends

................................ ................................ ................................ ................................ .......... 19
International Traffic and Fare Trends

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

### STRATEGIC PLAN

................................ ................................ ................................ .............................. 21 Proposed New Route

................................ ................................ ................................ ................................ ........... 21
Goals

................................ ................................ ................................ ................................ ................................ .... 21 Target Airline Support

................................ ................................ ................................ ................................ .......... 22 Fargo

- Dallas/Ft. Worth Traffic and Fare Trends

................................ ................................ ................................ .. 22 Connecting Traffic and Revenue on American via Dallas/Ft. Worth

................................ ................................ .... 24 American Eagle's Success in the Sioux Falls

- Dallas/Ft. Worth Market

................................ ............................... 28 Grant Amendments/Alternate Strategies

................................ ................................ ................................ ............. 31 

### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

................................ .......................... 32 Public / Private Partnerships

................................ ................................ ................................ ................................ 32 Project Funding

................................ ................................ ................................ ................................ .................... 32 Implementation Timeline

................................ ................................ ................................ ................................ ...... 33 

### PROJECT MONITORING AND FINANCIAL CONTROL

................................ ................................ ...... 34
Success Metrics

................................ ................................ ................................ ................................ ................... 34 Legal Sponsor

................................ ................................ ................................ ................................ ...................... 35
Financial Controls

................................ ................................ ................................ ................................ ................ 35Hector International Airport; Fargo, North Dakota

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### APPENDIX A: REQUIRED SUMMARY INFORMATION

................................ ................................ ..... 36

A. Applicant Information

................................ ................................ ................................ ................................ .... 36
B. Public/Private Partnerships

................................ ................................ ................................ .......................... 36
C. Project Proposal

................................ ................................ ................................ ................................ ........... 36
D. Existing Landing Aids at Local Airport

................................ ................................ ................................ .......... 37
E. Project Cost

................................ ................................ ................................ ................................ .................. 37
F. In

- Kind Contributions**

................................ ................................ ................................ ................................ . 37
G. Is this application subject to review by state under Executive Order 12372 Process?

................................ 37
H. Is this applicant delinquent on any federal debt?

................................ ................................ ......................... 37


### APPENDIX B: COMMUNITY BACKGROUND

................................ ................................ .................... 38 The Cities of Fargo and Moorhead

................................ ................................ ................................ ...................... 38
Economic Overview

................................ ................................ ................................ ................................ ............. 38 The Second Lowest Unemployment Rate in the United States

................................ ................................ ........... 40 

### APPENDIX C: LETTERS OF SUPPORT

................................ ................................ ............................. 41Hector International Airport; Fargo, North Dakota

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

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### INTRODUCTORY LETTERHector International Airport; Fargo, North Dakota

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

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### EXECUTIVE SUMMARY

Hector International Airport is request ing a Small Community Air Service Development (SCASD) Grant in the
amount of $750,000 to supplement community and airport cash contribution s of $275,000 , com munity in

- kind and airport in

- kind ince ntives valued at $25,000 for marketing and advertising to provide a minimum revenue guarantee for service between Fargo and Dallas/Ft. Worth on A merican Eagle . The total value of financial assistance and incentives for the proposed service is $1,050,000.

Dallas/Ft. Worth service is
propose d because the market generates 2 0.2 passengers per day each way, and it would provide service in one of Fargo's largest markets without nonstop service . In addition to the local market, the proposed
service could provide
connections to at least 100
other markets American serves
from Dallas/Ft. Worth. With Fargo's current air service, many of the markets Am erican serves from Dallas/Ft. Worth now require more than one connection for Fargo travelers. All Fargo markets America n and American Eagle could logically flow via
Dallas/Ft. Worth

- Fargo generated 252 ex

- Allegiant PDEW in 2010 at a relatively high avera ge one
- way fare of $212 each way.

While the data from Fargo's perspective indicates the proposed service would be successful, traffic data when ranked from the perspecitve of Dallas/Ft. Worth also indicates Fargo is a strong candidate for new service. Far go ranks as the second largest market under 1,000 miles without nonstop service from Dallas/Ft. Worth.

Fargo

- Dallas/Ft. Worth service could likely duplicate American Eagle's success in the Sioux Falls

- Dallas/Ft. Worth
market , which was inaugurated in April 2010 . This service is the result of a minimum revenue gaurantee partially funded by a SCASD award in 2008 . American Eagle began the service with one daily round trip and added a
second round trip in December 2010 . T he market generated a load factor of 7 7.7 % from January 2011 through April 201 1 with the second round trip in place (April 201 1 is the latest month for which T

- 100 data is available).Hector International Airport; Fargo, North Dakota

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successful and the Department's SCASD funding was effective.

Fargo's average domestic ex

- Allegiant fare s are high, and stood at $205 each way in 2010

-- up from $193 in 2009. This compares to an average domestic fare among all airports in the lower 48 United States of $15 7 in
2010 and $143 in 2009.

Frontier exited the Fargo market in February 2010, and attributed discontinuing Fargo service to the retirement of the Bombardier Q

- 400 fleet. Frontier's exit left Fargo with no low

- cost carrier service with connections to markets beyond a hub

– Allegiant carries only point

- to

- point traffic on its service from Fargo to Las Vegas, Phoenix/ Mesa, Los Angeles and Orlando/Sanford.

Fargo is a relatively large market, but it is fairly isolated. 226,000 residents live within a one hour drive of the airport; 590,000 residents live within a two hour drive of the airport. Parts of eastern North Dakot a and western
Minnesota lie within one hour of the airport, and the two

- hour catchment area extends into South Dakota. It is common for residents in parts of southern Manitoba, and Winnipeg
, in particular, to use air service at Hector International Airpor t.Hector International Airport; Fargo, North Dakota

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### AIR SERVICE OVERVIEW

Catchment Area

226 ,000 reside nts live within a one hour drive of Hector International Airport , and nearly 590,000 residents live
within a two ho ur drive of the airport . Fargo's catchment area varies somewhat based on the type of traveler and
t he traveler's destination. Allegiant's low fare service to leisure destinations , for example, attracts travelers from as far away as Winnipeg and other cities in Manitoba. High fare business travelers are generally not willing to
drive as far if similar air service is available from an airport closer to the ir homes or businesses. More often than not, they simply pay the fare available from the closer airport. Nonstop service also tends to attract travelers from a broader catchment area, a nd the proposed Fargo

- Dallas/Ft. Worth service would likely at tract traffic from a
broader are a than traffic to a destination requiring a connection from Fargo or the airport closer to the traveler.

Exhibit 1: One

- and Two

- Hour Drive T imes from Hector Inte rnational AirportHector International Airport; Fargo, North Dakota

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### Alternate Airports

Hector International Airport is the closest Airport to most residents within a one hour drive of the airport, and only the airport in Grand Forks is within a two hour drive of Fargo. Minneapolis/St. Paul is t he largest airport in the Upper Midwest and is located 250 road miles from downtown Fargo. The drive time to the airport in Minneapolis/St. Paul can vary depending on highway congestion in the Minneapolis/St. Paul metro area

– drive time can be considerably longer during the morning and evening rush hours.

Exhibit 2 : Location of Hector International Airport , One

- , Two

- and Three

- Hour Drive Times from Hector International Airport and the Locations of Other Airports of Significance in the RegionHector International Airport; Fargo, North Dakota

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### Fargo ' s Existing Air Service

Three network carriers, American, Delta and United
, serve Fargo from four hubs. American serves Fargo from Chicago, Delta operates service to Minneapolis/St. Paul and Salt Lake City, and United serves Fargo from Chicago and Denver. In addition to the network carrier service, Allegiant operates less

- than

- daily service to Las Vegas, Los Angele s, Mesa/Phoenix and Sanford/Orlando. Allegiant operates its service as point

- to

- point service and does not connect traffic beyond these destinations as the network carriers connect passengers beyond their
hubs.
The most recent addition to Fargo's air serv ice was American
, entering the market in April 2010 wi th three round trips to Chicago. Frontier discontinued service in Fargo in February 2010 when it ended Fargo

- Denver service.
Fargo has no southbound service, and the proposed Fargo

- Dallas/Ft. Worth ser vice would provide service in not only to Dallas/Ft. Worth, but it would also provide connections to many markets that currently require a double connection when traveling to or from Fargo.

Exhibit 3 : Current Routes Operated from Hector International Airp ortHector International Airport; Fargo, North Dakota

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- 0119 10 T he number of departures per day, average seats per departure and seats per day by market and by carrier for
December 2011 are displayed in Exhibit 4. Delta will account for 43.6% of Fargo's capacity in December 2011, United will account for 28.3% and American will account for 10.6% of Fargo's capacity. Collectively, the three network carriers will account for 82.6%, and Allegiant will account for 17.4% of Fargo's total capacity.

Fargo's capacity by hub is highly concentrated at Minneapolis/St. Paul and Chicago. Delta's service to the Twin Cities accounts for 38.4% of total capacity and nearly half

– 46.4%

– of network carrier capacity. The United a nd American service to Chicago accounts for 24.6% of total capacity and 30.1% of network carrier capacity. The
combined Minneapolis and Chicago service account s for 76.5% of network carrier capacity in Fargo.

Exhibit 4: Departures per Day *
, Seats per Dep art ure and Seats pe r Day by Market and Carrier at Fargo

– December 2011

* T he number of departures per day is displayed in increments of sevenths (because there are seven days in a week) . "2 6/7" is read as two flight s seven days a week wi th a t h i r d flight operated six of the seven days in a week.Hector International Airport; Fargo, North Dakota

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### Air Service Development Efforts

Hector International Airport officials have met on 16 occasions with nine airlines in the nine months between
October 2010 and June 2011 to discuss air service development and present business cases for new service. These meetings have included two meetings with American Eagle to discuss both existing Fargo

- Chicago service and potential Fargo

- Dallas/Ft. Worth service. Other meetings of note include four meetings with Alask a Airlines to discuss Fargo

- Seattle service (Fargo is home to the largest base of Microsoft employees outside the Seattle area, and Microsoft's presence in Fargo generates significant Fargo

- Seattle traffic).

Over the past five year s, Fargo has been success ful in attracting American Eagle to operate Fargo

- Chicago service and successful with Allegiant for service to Phoenix/Mesa, Los Angeles and Orlando/Sanford. Alaska Airlines has expressed interest in operating Fargo

- Seattle service, but does not have suff icient regional jet resources to operate the service in the short term.

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

– October 2010 through June 2011



### 2005 Small Community Air Service Development Grant

Hector International Airport was the recipient of a Small Community Air Service Development Grant in 2005 in the amount of $675,000. The grant was used for a minimum revenue guarantee for service on Delta Air Lines between Fargo and Salt Lake City. Delta has co nsidered the service to be successful and operates one daily flight in the market using a 70

- seat regional jet.Hector International Airport; Fargo, North Dakota

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### Marketing and Promotion of Fargo's Air Service

Hector International Airport actively markets air service within the Fargo media market. The Airport's advertising and marketing stresses the convenience of flying from Fargo and highlights attractions at destinations served from Fargo. In 2011, the Airport has budgeted $ 120,000 to market air service. The 2011 media plan calls for $52,000 in tel evision advertising, $21,000 in radio advertising, $34,000 in print advertising and $13,000 in on

- line advertising. On

- going annual advertising and marketing can be supplemented with destination

- sp ecific advertising to market new routes just prior to the inauguration of new service , and the proposed Fargo

- Dallas/Ft. Worth service would be marketed separately from the Airport's planned marketing and advertising campaigns.

Exhibit 6 : Examples of Hector International Airport's Print AdvertisingHector International Airport; Fargo, North Dakota

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### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

Capacit y Trend s

Ex

- Allegiant capacity at Fargo reached a peak in 2006, and was down 3.9% to 1,124 seats per day each way in 2010. Delta provides more capacity in Fargo than any other airline, and when capacity data is analyzed by carrier, the combined Delta/Northwest capacity is d own 34.2 % since 2006 from 838 seats per day each way to 552 seats per day each way. In addition to less capacity on Delta, Frontier exited the Fargo market in February
20 10 taking two daily departures operated with 74

- seat aircraft out of the market. Without increased capacity by United and American's new Fargo

- Chicago service in beginning in April 2010, Fargo's ex

- Allegiant ca pacity would
be down much more since 2006

.
Exhibit 7 : Network Carrier Seats per Day Ea ch Way at Hector International Airport by Carrier

– 2001

- 2010 (DOT T

- 100 data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- time high in 2010 when Allegiant data is included, Allegiant serves only Las Vegas, Phoenix/Mesa, Los Angeles and Sanford/Orlando from Fargo. Unlike the network carriers, Allegiant only carries point

- to

- point traffic to the four destinations it serves from Fargo and does not provide con necting service to the larger worldwide route networks provided by the network carriers. Allegiant's service is not operated on a daily basis, and the Los Angeles and Sanford/Orlando service does not operate year

- round.

Exhibit 8 : Network Carrier and All egiant Seats per Day Ea ch Way at Hector International Airport by Carrier

– 2001

- 2010 (DOT T

- 100 data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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### Frontier Discontinued Fargo Service in Early 2010

Frontier began service in the Denver

- Fargo market in May 2008 and provided the only low

- cost carrier service in Fargo that connected with an on

- line network of destinations beyond a hub (Allegi ant is also considered a low

cost carrier, but does not connect traffic beyond the four destinations it serves from Fargo)

. Unfortunately, Frontier exited the Fargo market in February 2010 and attributed the exit to a planned retirement of its Bombardier Q

- 400 aircraft.
Frontier's Fargo

- Denver service logically connected 34 markets beyond the Denver hub when the service operated. While Delta, United and American can also provide service to most of these destinations with connections via their respective hubs, Frontier, a s a low

- cost carrier
, generally offered lower fares (which were mostly matched by the network carriers) to the destinations served via Denver. Since Frontier exited the Fargo

Denver market, average fares have increased in the market s Frontier served

.
Exhibit 9 : Destinations Frontier Served via Denver when Frontier Operated Fargo

- Denver ServiceHector International Airport; Fargo, North Dakota

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### Traffic Trend

s

Fargo's ex

- Allegiant domestic traffic peak corresponds with the capacity peak in 2006

. In 2006, Fargo generated 533,520 domestic ex

- Allegiant origin and destination passengers. In 2010, the domestic ex

- Allegiant tr affic was down 3.7% versus 2006 to 513,590 origin and destination passengers. Fargo's international traffic is up 29.2%
sinc e 2006, and Allegiant's traffic is up nearly fivefold since its first year of Fargo service.

Exhibit 10 : Annual D omestic and International Origin and Destination (O&D) Passengers at Hector International Airport Year

- End Fourth Quarter 2001

- 2010 ( DB1B d ata)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- 0119 17 When the annual origin and destination data is converted to passengers per day each way (PDEW), Fargo generated 704 domestic ex

- Allegiant PDEW, 202 Allegiant PDEW and 64 international PDEW in 2010.

Exhibit 1 1 : Domestic and International Passengers per Day Each Way (PDEW) at Hector International Airport Year

- End Fourth Quarter 2001

- 2010 (DB1B data)Hector International Airport; Fargo, North Dakota

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### Leakage to Other Airports in the Region

Although Minneapolis is a 250 mile trip by car from Fargo, Hector International Airport loses 14.3% of the traffic generated in the airport's immediate catchment area to Minneapolis/St. Paul
, where Delta operates a hub and
low

- cost carriers such as Southwest, AirTran, Frontier and Sun Country operate service to various d estinations. Overall, Fargo retains just 75.5% of the traffic generated in its immediate catchment area. The addition of a new destination, such as Dallas/Ft. Worth, would likely enable Fargo to r etain a higher percentage of the traffic generated in the region.

Exhibit 12 : Airport Origin for Fargo Catchment Area Traffic January 2009

– December 2009 (March 2010 Leakage Study)Hector International Airport; Fargo, North Dakota

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### Domestic Fare Trend

s

The average ex

- Allegiant domestic fare at Fargo was $205 each way in 2010. The average fare essentially returned to its 2006 level after peaking at $232 in 2008, but it is up from $193 in 2009. Over the last ten years, Fargo's average domestic ex

- Allegia nt fare was at its lowest point in 2003 when the average fare was $169. Versus 2003, the fare is up $36 each way or 21.6%.

While network carrier fare structures would likely not change significantly with the introduction of new network
carrier service to a new destination, Fargo travelers would benefit as more of the lowest fares within existing fare structures are made available with the additional capacity.

Exhibit 13 : Ex

- Allegiant Passengers per Day Each Way (PDEW), Seats per Day Each Way and Average Domestic One

- Way Fare at Hector International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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### International Traffic and Fare Trends

Fargo 's international traffic has increased steadily over the last ten years to 64 PDEW in 2010. The average international fare stood at $534 each way in 2010

– down from a peak of $586 in 2008, but up 9.9% from 2009. The international fare in 2010 was essentially at its 2007 level of $529 when Fargo 's international traffic was 56
PDEW.

Exhibit 14 : International Passengers per Day Each Way (PDEW), and Average One

- Way International Fare at Hector International Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)Hector International Airport; Fargo, North Dakota

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### STRATEGIC PLAN

Proposed New Route

Hector International Airport and its community part n ers in Fargo/Moorhead are requesti ng Small Community Air Service Development funds to support a minimum revenue guarantee for regional jet service on American Eagle
be tween Fargo and Dallas/Ft. Worth. The proposed new service would benefit a mix of business and leisure
travelers.

An American Eagle Embraer 145 Regional Jet at Hector International Airport


### Goals

Fargo has four goals with its Small Community Air Service Development Grant proposal for service to Dallas/Ft.
Worth.

 Better access to Dallas/Ft. Worth and the connecting markets served via Dallas/Ft. Worth , particularly connecting markets in Texas such as Houston, Austin, San Ant onio, McAllen and markets in Latin America.

 Additional traffic in the Fargo

- Dallas/Ft. Worth market and the markets connecting beyond Dallas/Ft. Worth.

 Lower fares in the local Fargo

- Dallas/Ft. Worth market and the largest connecting markets beyond Dallas/ Ft. Worth

.

 Recapture catchment area traffic leaked to other airports

.Hector International Airport; Fargo, North Dakota

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### Target Airline Support

Hector International Airport has met with American Eagle on two separate occasions in 2011 and American Eagle has expressed interest in the proposed Fargo

- Dallas/ Ft. Worth service . Like many other airlines, American Eagle has a policy of not writing letters of support for Small Community Air Service Development proposal given the number of requests it receives between the release of the RFP and the submission dead line. It should be noted American Eagle has used Small Community Air Service Development funds to begin service in two markets recently: Sioux Falls

- Dalla s/Ft. Worth and Springfield, IL

- Dallas/Ft. Worth.


### Fargo

- Dallas/Ft. Worth Traffic and Fare Trends

The Fargo

- Dallas/Ft Worth market size increased to an all

- time high of 20.2 PDEW in 2010 and increased 19.6% from 16.9 PDEW in 2009. The traffic growth in 2010 is especially encouraging because the average fare declined only $5 or 3.0%, so the growth in t raffic did not result from a significantly lower fare.

Exhibit 15 : Fargo

- Dallas/Ft. Worth (IAH and HOU) Passengers per Day Each Way ( PDEW )

– Year

- End Fourth Quarter ( DB1B data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- 0119 23 Analysis of quarterly data indicates Fargo

- Dallas/Ft. Worth traffic peaked in 2010 in second quarter, and the average fare, while trending down slightly in 2010, remained at $170 in each direction in third and fourth quarter. A large downward trend in the fare would be unfavorable for discussions with American Eagle, and a trend back up in first quarter and second quarter 2011 data will improve the business case for Dallas/Ft. Worth service.

Exhibit 16 : Fargo

- Dallas/Ft. Worth ( IAH and HOU ) PDEW and Average Fare

– Fourth Quarter 20 08 through Fourth Quarter 2010 (DB1B data)

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### Connecting T

raffic and Revenue on American via Dallas/Ft. Worth

Fargo

- Dallas/Ft. Worth service could connect with at least 100 markets American and American Eagle serve from their hub in Dallas/Ft. Worth. Fargo has no nonstop southbound network carrier service, and the proposed service would enable new single connections in many markets that cannot be reached from Fargo with a single connection. Of the 100 airpor ts displayed on the map below, 45 of the airports now require a dou ble connection to or from Fargo because they are not served nonstop from Minneapolis/St. Paul, Chicago, Denver or Salt Lake City. Markets that now require a double connection are displayed with red lines in the map below.

Phoenix International is an example of a company based in Fargo that could benefit from the proposed service. The company is a subsidiary o f John Deere and designs electronic components for Deere equipment in Fargo.
The s e components are manufactured in Torreon, Mexico , and travel is frequently required between Fargo and Torreon. The trip requires a double connection and consumes a full day for travel. The proposed service could eliminate one of the connections, cut trav el time and increase productivity for Phoenix International's employees.

Exhibit 17 : Non

- Circuitous Markets American Could Serve with Fargo

- Dallas/Ft. Worth Service (Red Lines Indicate Markets Currently Not Served Single Connections to/from Fargo via Min neapolis/St. Paul, Chicago, Denver or Salt Lake City ).

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- 0119 25 The 30 largest Fargo markets American could flow via its hub in Dallas/Ft. Worth generated 230 ex
- Allegiant
PDEW in 2010; all markets that could flow via Dallas/Ft. Worth generated 252 ex
- Allegiant PDEW. These 252 ex

Allegiant PDEW account for more than one

- third

– 35.8%

– of the total 704 domestic ex

- Allegiant PDEW Fargo generated in 2010

Airports in the Los Ange les Basin and Phoenix constituted the two largest markets
, and Dallas/Ft. Worth was the third largest market. Two other markets in Texas, Houston and San Antonio
, are included in the ten largest markets, and Austin ranks as the thirteenth (13th) largest m arket. 68.3% of the traffic in these 30 largest markets originated in Fargo.

Exhibit 18 : Origin and Destination Passengers and PDEW in the 30 Largest Markets American Could Flow via Dallas/Ft. Worth (Excludes Allegiant Data)

– Year

- End Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- 0119 26 The average one

- way ex
- Allegiant fare in the 30 largest Fargo markets American could flow via Da llas/Ft. Worth was $201 in 2010; all markets that could flow via Dallas/Ft. Worth generated an average f are of $212. 18 of the 30 largest markets generated an average fare higher than $201; smaller markets tended to generate higher fares than the larger markets toward the top of the list.

Exhibit 19 : Average One

- Way Fare in the 30 Largest Markets American Could Flow via Dallas/Ft. Worth (Excludes Allegiant Data)

– Year

- End Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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- 0119 27 F argo is the second largest Dallas/Ft. Worth market under 1,000 miles without nonstop service from Dallas/Ft. Worth. Although Green Bay is a larger market, based on 2010 origin and destination data, Fargo's average fare was $29 higher in each direction, an d Fargo's yield was 2.4 cents higher than Green Bay's yield.

As American builds a larger route network from its Dallas/Ft. Worth hub, American will analyze underserved
markets based on market size , fares and distance from the hub. A combination of local market size, average fare, yield, distance from the hub and connecting traffic will factor into American's forecast, and all five variables are aligned in Fargo's favor. It should be noted that no markets larger than the markets illustrated in the table
below , which are less than 1,000 miles from Dallas/Ft. Worth
, are without nonstop service.

E xhibit 20 : Dallas/Ft. Worth Domestic Market Data: Distance, Passengers per Day Each Way (PDEW) One

- Way Fare, Yield, Rev enue per Day Each Way and Nonstop Service Indic ation (Markets Ranked by PDEW with #100 through #12 5 illustrated / Year

- End Fourth Quarter 2010 Data ( DB1B data) )Hector International Airport; Fargo, North Dakota

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### American Eagle's Success in the Sioux Falls

- Dallas/Ft. Worth Market

The Department awarded Sioux Falls a Small Community Air Service Development Grant in 2008 in the amount of $500,000 for service between Sioux Falls and Dallas/Ft. Worth. In April 2010, American Eagle began service
in the Sioux Falls

- Dallas/Ft. Worth market with one daily round trip (a second roundtrip was adde d in December,
and a third roundtrip will be added on November 17, 2011 )

. American Eagle's performance in the Sioux Falls

Dallas/Ft. Worth market could likely serve as a model f or how Fargo

- Dallas/Ft. Worth service could perform, but American would likely require a minimum revenue guarantee to consider Fargo

- Dallas/Ft. Worth service.

As illustrated in Exhibit 22 , American Eagle generated a load factor of 76.5% in the first month it operated the service, and the load factor grew to 83.7% in June 2010. In N ovember 2010, American Eagle's load factor was 86.2%, and in December, American Eagle added a second daily flight. Even with a second daily flight, the route produced a load factor of 84.2% in February, just two months after beginning the second flight. Over the 13
months T

- 100 is available between April 2010 and April 2011, American Eagle's Sioux Falls

- Dallas/Ft. Worth load
factor was 78.4%.

Exhibit 21 : American Eagle Sioux Falls

- Dallas/Ft. Worth Flights per Day Each Way, Load Factor by Month and Avera ge April 2010

- April 2011 Load Factor (DOT T

- 100 Data)

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- 0119 29 American Eagle's Sioux Falls

- Dallas/Ft. Worth service, which began in second quarter 20 10 , has resulted in
additional traffic and lower fares between Sioux Falls and Dallas/Ft. Worth . In 2009, the market produced an average of 16.0 PDEW b etween second and fourth quarter 2 010. Over the same period in 2010, the market produced an average of 24.3 PDEW, a 51.2% increase over 2009. The average fa re fell 19.1%, from $237 to $192, between second quarter and fourth quarter 2010 compared to the same period in 2009.

Exhibit 22 : Sioux Falls

- Dallas/Ft. Worth Passengers per Day Each Way (PDEW) and Average One Way Fare

– First Quarter 2008 through Four th Quarter 2010 (DB1B Data)

This Section Continued on Next PageHector International Airport; Fargo, North Dakota

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

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- 0119 30 If the Fargo Dallas

- Ft. Worth market size were to increase as the Sioux Falls

- Dallas/Ft. Worth quarterly market
size increased year
- over
- year with the introduction of nonstop service, Fa rgo
- Dallas/Ft. Worth would increase to 39.6 PDEW in second quarter 2010, 30.4 PDEW in third quarter 2010 and 26.4 PDEW in fourth quarter 2010. The actual Fargo

- Dallas/Ft. Worth average market size was 21.1 PDEW from second quarter 2010 to fourth quarter 2 010 and would have been 31.1 PDEW with the year

- over
- year Sioux Falls

- Dallas/Ft. Worth market size growth. Historically, the Fargo

- Dallas/Ft. Worth market size has been larger than the Sioux Falls

- Dallas/Ft. Worth market size and could easily grow at leas t as much as the Sioux Falls market size grew with the introduction of nonstop service.

Exhibit 23 : Actual Sioux Falls

- Dallas/Ft. Worth PDEW, Actual Fargo

- Dallas/Ft. Worth PDEW and Fargo

- Dallas/Ft. Worth Market Size at Sioux Falls

- Dallas/Ft. Worth Growth

– First Quarter 2008 through Fourth Quarter 2010 (DB1B Data)Hector International Airport; Fargo, North Dakota

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

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### Grant Amendments/

Alternate Strategies

Nonstop Fargo

- Dallas/Ft. Worth service is the goal of the community's Small Community Air Service Development (SCASD) proposal. The community is prop osing SCASD funding in the amount of $750,000 that will be supplemented with $275 ,000 in cash from community

- based business and economic development organizations to offer a minimum revenue guarantee to American Eagle for Dallas/Ft. Worth service. An addi tional $25,000 of
in

- kind marketing and advertising contributions would supplement the cash incentives offered by the community
for the service. Analysis of traffic and revenue data indicates the proposed service should be an appealing

o pportunity for American Eagle.

If a grant is awarded for Fargo

- Dallas/Ft. Worth service, and the community is not successful in its effort to recruit American Eagle to Dalla s/Ft. Worth, Hector International Airport would ask to Department to consider reallocation
of the award funds for service to an alternate hub on a network carrier . Potential routes would include Seattle on Alaska, Houston on United, Phoenix on US Airways, Detroit on Delta
, and Washington on United.Hector International Airport; Fargo, North Dakota

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

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### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

P ublic / Private Partnerships

While Hector International Airport is the project sponsor and is a partner in the project , three other organizations are partners in the proposal.

 Greater Fargo

- Moorhead Economic Development Corporation

 Fargo

- Moorhead Convention and Visitors Bureau

 Chamber of Commerce of Fargo

- Moorhead and West Fargo 

### Project Funding

Hector International Airport is requesting a Small Community Air Service Development grant of $750,000 for its proposed minimum revenue guarantee for servi ce between Fargo and Dallas/Ft. Worth on American Eagle. The economic development, convention and visitors bureau and chamber of commerce o rganizations in the community have pledged $150,000 in cash to supplement the award, and Hector International Airpor t will provide $125,000 in cash to supplement the award. The total cash pledged by the community

- based organizations and the Airport equates to 36.7% of the requested grant amount. In addition, the Airport will provide up to $25,000 of
in

- kind advertising and marketing for the proposed Dallas/Ft. Worth service

Ex hibit 24 : Sources and Types of Proposed Project Funding

.Hector International Airport; Fargo, North Dakota

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

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### Implementation Timeline

Hector International Airport will begin discussions with American Eagle immediately after learnin g the Department awards a Small Community Air Service Development grant for the proposed Fargo

- Dallas/Ft. Worth service. The timing of the announcement, expected in September, will provide sufficient time to meet with American Eagle to continue previous d iscussions and provide time for American Eagle to perform further analysis of the market. Assuming discussions are successful in September and October and American Eagle decides to enter the Fargo

Dallas/Ft. Worth market, the next major schedule change da te which would provide sufficient time for advance bookings is the April 2012 schedule change. American Eagle's annual April schedule change typically occurs within the first seven days of the month. Once the service begins, Hector International Airport will remain in close communication with American Eagle to monitor the performance of the route.

Exhibit 25 : Proposed Project TimelineHector International Airport; Fargo, North Dakota

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

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### PROJECT MONITORING AND FINANCIAL CONTROL
Success Metrics

Four goals have been established to measure the success of the proposed project. The goals of the project are aimed at increasing traffic and lower fares. These goals are objective and can be measured by comparing year

over
- year market size changes and ch anges in fares on a quarterly basis as DOT traffic and revenue data is published. Another measure of success will be American Eagle's load factor performance on the flights operated in the proposed market. High load factor s (defined as load factors in th e upper 70s or greater) will constitute traffic metric success. The amount of subsidy required by American Eagle will also provide an indication of the
route's success. Project Goals Success Metric

 Nonstop access to Dallas/Ft. Worth and less circuitous c onnections to markets served by Americ an and American Eagle via Dallas/Ft Worth

.  Inauguration of nonstop Fargo

- Dallas/Ft. Worth service.

 Stimulation of the Fargo

- Dallas/Ft. Worth market size and the markets served by American and American Eagle via Dallas/Ft. Worth

.  Fargo

- Dallas/Ft. Worth market size growth and market size growth in the markets that could connect to markets beyond Dallas/Ft. Worth.

 Lower fares in the Dallas/Ft. Worth market and the markets connecting beyond Dallas/Ft. Worth.  Quarter ly year

- over
- year declines in fares for the local Fargo

- Dallas/Ft. Worth market and the largest markets beyond Dallas/Ft. Worth

.
 Recapture catchment area traffic leaked to Minneapolis/St. Paul.  Increased retention (and less leakage) of the traffic generat ed in Fargo's immediate catchment
area.Hector International Airport; Fargo, North Dakota

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

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### Legal Sponsor

The Municipal Airport Authority of the City of Fargo, North Dakota
, is the legal sponsor responsible for administering th e program and Fargo 's Municipal Airport Authority is a government entity.

Municipal Airport Authority of the City of Fargo, North Dakota
Hector International Airport

Box 2845
Fargo , ND 58108
Shawn A. Dobberstein, A.A.E.

Executive Director

701

- 241

- 1501 (office)

701

- 241

- 1538 (fax)



### Financial Controls

As the sponsor, the Municipal Airport Authority of the City of Fargo, North Dakota and its governing body, the Municipal Airport Authority Board , will be the responsible partie s for all fiscal matters and the Department's reporti ng requirements. The Municipal Airport Authority Board is established as a public governing body. As a public entity
, the Department can be assured that proper financial controls are in place to guarantee that the Department ’s Grant will be used in accordance with any subsequent agreement. The Municipal Air port Authority
Board understands that the Grant is a reimbursable grant, meaning the Airport is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request.Hector International Airport; Fargo, North Dakota

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

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### APPENDIX A: REQUIRED SUMMARY INFORMATION

A. Applicant Information

Not a Consortium

Interstate Consortium

I ntrastate Consortium
Community now receives EAS subsidy
Community (or Consortium member) previously receive d a Small Community Grant
If previous recipient: Date of Grant: 9/12/2005 Expiration Date of Grant: 9/12/2008


### B. Public/Private Partnerships

Public

 Fargo Municipal Airport Authority

Private

 Greater Fargo

- Moorhead Economic Development Corporation

 Fargo

- Moorhead Convention and Visitors Bureau

 Chamber of Commerce of Fargo

- Moorhead and West Fargo



### C. Project Proposal

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

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

Hector International Airport requests Small Community Air Service Development funding to provide a minimum revenue guarantee for American Eagle service between Fargo and Dallas/Ft. Worth.Hector International Airport; Fargo, North Dakota

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### D. Existing Landing Aids at Local Airport

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



### E. Project Cost

F. In

- Kind Contributions**

For funds in lines 5 a (Airport In

- Kind contribution) and 5 b (Other In

- Kind contribution), please describe the source(s) of fund(s) for each.
(5a) Hector International Airport will provide marketing and advertising funding of up to $25,000 over two years to market the proposed Fargo

- Dallas/Ft. Worth service.


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

a. This application was made available to the State under the Executive Order 12372 Process for review on (date):

b. Program is subject to E.O. 12372, but has not been selected by the State for review.
c. Program is not covered by E.O. 12372



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

No Yes (explain)Hector International Airport; Fargo, North Dakota

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

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### APPENDIX B: COMMUNITY BACKGROUND The Cities of Fargo and Moorhead

Fargo (which includes its twin sister city, Moorhead, MN
, located just across the state line) is a diverse, stimulating and family

oriented city with all the amenities that make for a satisfying and fulfilling life.

Those with firsthand experience talk about Fargo

- Moorhead's except ional K

- 12 and higher education systems,
world

- class health care, affordable housing, low cost of living and myriad cultural and entertainment options. They mention stress, crime and traffic jams, too, but only to say there isn't much of that here.

Economi

c Overview

The population of the Fargo MSA is approximately 200,000 residents. Since 2000, the population has g rown 14.5% . The median household income is $45,315 and the median home cost in Fargo Metro Area is $140,680.
U nlike many areas of the country hit hard by the recession, Fargo actually experienced growth in home values
and has one of the lowest foreclosure rates in the United States.

Despite the economic downturn in the rest of the U.S., Fargo

- Moorhead’s economy continues to expand . In 2009, co mpanies in Fargo

- Moorhead added more than 300 new jobs, mitigating small job losses in smaller businesses.

Fargo is the economic engine that drives the Upper Great Plains, and a high

- tech center for
dev elopment that continues to grow.

 Fargo is a technological, manufacturing, retail, and educational hub with a regional population of almost 700,000.

• Fargo has grown more than 20% in the last 15

- years

– and local businesses have created 13,000 new jobs since 2000

.Hector International Airport; Fargo, North Dakota

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

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- 0119 39 • The Forum recently wrote, “North Dak ota’s exports grew by more than 34% [in 2007] alone, giving it one of the fastest rates of export growth in the country .”

• According to the Fourth Quarter 2008 job survey released by Manpower, Inc., the Fargo

- Moorhead area enjoyed the fourth

- strongest job m arket in the nation

.

• The Los Angeles Times featured Fargo as an, “improbably stylish, worldly, even luxurious [city].”

• National Public Radio recently reported, “Quietly, Fargo has been flourishing . Fargo has steadily created jobs and over the last few yea rs has consistently posted one of the nation's lowest unemployment rates ."

• Among the major corporations with operations in Fargo are Microsoft, Bobcat, NAVTEQ, Case New Holland, Wells Fargo, US Bank, and Caterpillar.
National Rankings of the Fargo

- Moorhea d Business Climate:

• #5 in Forbes ranking of the Top College Towns for Jobs in May 2009.

• #7 in Forbes Best Places for Business and Careers in March 2009. The index ranks cities according to cost of doing business, educational attainment of the population, income growth, projected job growth and net migration.

• #1 city in North Dakota for entrepreneurial start ups, according to Business Week.

• #8 in MSN and CareerBuilder.com's October 2008 list of the 25 Best Markets to Find a Job.

• #24 out of the Top 100 Be st Places to Live and Launch a Business, according to Fortune Small Business in April 2008.

• #9 in America's Top 50 Business Opportunity Metros for 2007

- Expansion Mgmt Magazine.Hector International Airport; Fargo, North Dakota

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### The Second Lowest Unemployment Rate in the United States

With an Unemployment Rate of Just 3.5 %, Fargo Has the Second Lowest Unemployment Rate among all metropolitan statistical areas (MSAs) in the United States. In fac t, the three MSAs in North Dakota, Bismarck, Fargo and Grand Forks, are among the four MSAs with the lowest unemployment rates in the United States. North Dakota's 3.0% statewide unemployment rate is the lowest among all 50 states.

Exhibit 26 : May 2011 Unemployment Rates

– U.S. Average and the 25 Metropolitan Statistical Areas with the Lowest Unemploym ent RatesHector International Airport; Fargo, North Dakota

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### APPENDIX C: LETTERS OF SUPPORTHector International Airport; Fargo, North Dakota

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- 0119 42Hector International Airport; Fargo, North Dakota

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- 0119 43Hector International Airport; Fargo, North Dakota

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