NEWPORT NEWS/WILLIAMSBURG 

INTERNATIONAL AIRPORT (PHF) 

DUNS Number: 099594624

Congressional District VA-01

APPLICATION UNDER

THE SMALL COMMUNITY AIR SERVICE 

DEVELOPMENT GRANT PROGRAM

USDOT Docket DOT-OST-2012-0069

June 11, 2012

Prepared By:

Peninsula Airport Commission

900 Bland Boulevard

Suite G

Newport News, Virginia 23602
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 1

TABLE OF CONTENTS

A. Executive Summary....................................................................................................................... 2

B. Airport Contact Information ...................................................................................................... 3

C. Problem Statement........................................................................................................................ 4

C.1 Historical Capacity.................................................................................................................... 6

C.2 Forecasted Capacity ................................................................................................................. 6

C.3 Historical Fares.......................................................................................................................... 6

C.4 Present Day Fares...................................................................................................................... 7

D. Proposed Use of Funds .............................................................................................................. 10

D.1 Economic Model ...................................................................................................................... 11

D.2 Loss of Nonstop New York City/Boston Service .............................................................. 12

D.3 Lack of Hub Connectivity...................................................................................................... 14

E. Project Proposal............................................................................................................................... 18

E.1 Funding Mix.............................................................................................................................. 18

E.2 Grant Form ............................................................................................................................... 19

E.3 Marketing Plans ....................................................................................................................... 19

E.4 Post-Program Support............................................................................................................ 20

F. Letters of Support........................................................................................................................... 21
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 2

A. Executive Summary

Within the course of a three week period in Spring 2012, the Newport News/Williamsburg 

International Airport (PHF) saw a 50% reduction in daily departing seats, which resulted in 

combined March-April 2012 enplanement levels 35% lower than the same period in 2011. 

The decrease in seat capacity was a result of Southwest Airlines’ decision to withdraw AirTran 

Airways’ service from PHF effective March 2012. As a competitive response to that decision,

Delta Air Lines reduced seat capacity by 54%. Perhaps no other airport having applied for 

SCASD grant funds has faced such a decrease in seat capacity due to the acquisition of 

AirTran Airways by Southwest Airlines. 

Some key facts from the enclosed application for a Small Community Air Service Development 

Grant include:

1. Much of the growth in passenger enplanements at the airport since 1998 was due to 

the presence of AirTran Airways and the fare discipline that resulted from the 

presence of a low fare carrier in the market. The PHF average one way gross fare has 

historically been 11% below the average one way gross fare out of Norfolk International 

Airport (ORF) due to 1) heavy competition on the ATL hub route between AirTran 

Airways and Delta Air Lines and 2) low fares to traditionally high fare markets such as 

LGA and BOS.

2. The withdrawal of AirTran Airways and overall reduction in departing seats resulted in 

the loss of 75 full time equivalent airport, airline, concession and TSA employees. 

3. Reduction in visitation to the region is anticipated to result in a loss of over $150 

million in annual economic impact.

1

4. 66% of all departing seats from PHF are on aircraft with 50-seats or less.

5. One way historical gross airfare out of PHF has traditionally been lower than the 

national one way gross fare. However, in the period ending 4Q2008, the average one 

way gross fare out of PHF eclipsed the national average and has remained higher than 

the national average in every quarter since then.

6. The loss of nonstop LGA and BOS flights with AirTran Airways has increased the 

passenger disutility valuation of time by $31.5 million.

2

7. An increased demand over the CLT hub was created with the loss of AirTran Airways

connectivity over the ATL hub and the subsequent decrease in Delta Air Lines seat 

capacity over ATL. But, PHF is currently seat capacity constrained over both the ATL 

and CLT hubs. This ostensibly is causing passengers to connect thru ATL and CLT, or 

other hubs, from the other airports in the region.

 

1 This figure is based on reported economic impact per enplanement of $705 as determined by the 2011 

Commonwealth of Virginia Department of Aviation “Virginia Airport System Economic Impact Study” conducted by 

SH&E.

2

Passenger value of time was estimated by applying an inflation rate of 2.7% which is equal to the CPI-U for the 

Washington D.C.-Baltimore region to the reported business and leisure intercity travel value of time in “The Value of 

Saving Travel Time: Departmental Guidance for Conducting Economic Evaluation” published by the USDOT on April 9, 

1997. For further model information, please see Section D.1. 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 3

8. 20% of the Top 10 O+D city pairs (DFW and IAH), and 35% of the Top 20 city pairs 

(DFW, IAH, HOU, ORD, SAT, STL and MSP) are located in the Ohio Valley, Upper 

Midwest or South Central portions of the United States. But, PHF currently does not 

have a nonstop flight to DTW, ORD, MSP, DFW or IAH.

9. The presence of adequate seat capacity out of PHF stimulates traffic at the three 

airports in the region (PHF, RIC and ORF). PHF traffic in March and April was down 

57,534 passengers. Logic would dictate that if the passengers were not flying out of 

PHF, then ORF and RIC would see an increase equal to the decrease in passengers 

flying out of PHF. But, this is turning out not to be the case. During the same time 

period, ORF and RIC were up 12,490 passengers, meaning that 45,044 fewer 

passengers flew in March and April 2012 out of three airports. Therefore, adequate 

seat capacity, hub connectivity and key point-to-point destinations are necessary in 

keeping the region’s passenger traffic up. 

10. Military and government facilities on the Peninsula generate 60% of all military and 

government bookings out the three airports in the region. Recent coordination with 

the GSA has increased the number of city pairs and resulted in an increase in PHF’s 

capture of locally generated military and government bookings. This lead to a record 

level of enplanements at PHF in 2010. However, the loss of seat capacity is beginning 

to impact both the GSA’s and PHF’s ability to adequately serve our military and 

government traffic. 

If seat capacity is not regained, PHF would effectively lose 9 years of growth in enplanement 

levels and seat capacity, which will result in a further loss of direct employment and the 

associated regional job loss resulting from a reduced total economic impact. Our goals with 

the grant funds are: 1) restore nonstop service to the New York and Boston markets, 2) upgauge aircraft flying and/or frequency into the CLT hub and establish nonstop service to 

Chicago O’Hare International and/or Dallas-Fort Worth International Airport.

B. Airport Contact Information

Newport News/Williamsburg International Airport

Peninsula Airport Commission

Ken R. Spirito, A.A.E.

Executive Director

900 Bland Boulevard, Suite G

Newport News, Virginia 23602-4319

Phone: (757) 877-0221

Fax: (757) 877-6369

kspirito@flyphf.com

www.flyphf.com
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 4

C. Problem Statement

On March 10, 2012, PHF underwent a significant reduction in seat capacity when AirTran 

Airways terminated service. This ended a 16 year relationship between AirTran Airways and 

the Peninsula Airport Commission that began in 1995 with ValuJet. The decision to terminate 

AirTran Airways service at PHF was a direct result of the acquisition of AirTran Airways by 

Southwest Airlines. Prior to the termination of service, AirTran Airways offered 9 daily nonstop flights to 4 destinations: Hartsfield-Jackson Atlanta International Airport (4 daily flights), 

LaGuardia Airport (2 daily flights), Boston-Logan International Airport (1 daily flight and 1 

seasonal flight) and Orlando International Airport (1 daily flight). The 9 daily flights provided 

1,053 daily departing seats and resulted in AirTran Airways representing 45% of the departing 

seats out of PHF for the YE4Q2011. 

Further exacerbating the problem was a competitive response from Delta Air Lines to the 

withdrawal of AirTran Airways from PHF. As Delta Air Lines no longer had to compete against 

AirTran Airways to the Atlanta hub, Delta Air Lines down gauged aircraft in February 2012 

from three (3) MD-88 daily departures, one (1) CRJ900 daily departure and one (1) CRJ700

daily departure totaling 568 daily departing seats to six (6) CRJ200 flights totaling 300

departing seats. Coupled with the loss of the four daily flights between PHF and ATL on 

AirTran Airways B717’s, the region lost 736 departing seats to the Atlanta hub and 1,037 seats 

(or 44% of daily departing seats) to all destinations in total. 

The loss of AirTran Airways, and the competitive response by Delta Air Lines, has resulted in 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 5

significant negative ramifications in terms of both direct and indirect economic impact. The 

withdrawal of AirTran Airways and reduction in operating revenues and/or need for federal 

workers resulted in the loss of 75 full time equivalent airport, airline, concession and TSA 

employees. In addition, the reduction in visitation to the region is anticipated to result in a 

loss of over $150 million in annual economic impact.3

Post AirTran Airways departure, the airport is served by four (4) airlines offering non-stop 

service to five (5) destinations (see Figure 1). These four airlines provide an average of 18.4 

daily departures and 1,033 daily departing seats for an average aircraft size of 56.1 seats per 

departure. The average aircraft size is driven by the fact that 86% of all departures and 66% of 

all departing seats are on aircraft with 50-seats or less. With airlines examining the role of the 

50-seat regional jet in their system, PHF could see further reductions in departing seats as 

carriers switch out 50-seat aircraft with 70-seat aircraft and reduce frequencies to keep load 

factors high. Frontier Airlines resumed seasonal less-than-daily service into PHF on March 1, 

2012 and started daily year-round nonstop flights to DEN on May 22, 2012. Allegiant Airlines 

started less-than-daily nonstop Orland-Sanford operations in November 2011 adding an 

equivalent 86 daily departing seats to the PHF market. Despite these two capacity increases, 

PHF is still down over 45% in departing seat capacity from February 2012 levels. This decrease 

is even more pronounced when year-over-year average daily departing seats during the peak 

month of passenger enplanements (July) are compared. July 2012 average daily departing 

seats equal 1,049 which is 54% below July 2011 average daily departing seats of 2,280. 

 

3 This figure is based on reported economic impact per enplanement of $705 as determined by the 2011 

Commonwealth of Virginia Department of Aviation “Virginia Airport System Economic Impact Study” conducted by 

SH&E.
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 6

Historical enplanement levels at PHF since 1990 exhibits three distinct periods of activity. 

From 1990 to 1998 the enplanement levels were fairly level primarily due to the fact that PHF 

experienced relatively low load factors ranging from 35% to 50%. Beginning in 1999, PHF grew 

at a very high compounded annual rate of growth of over 16.4% with enplanements more than 

doubling from 205,000 in 1999 to 510,000 by 2005. A majority of this growth occurred 

between 2003 and 2005 with enplanements growing by 172,300 in the span of two years. The 

last period of activity was from 2005 to 2011 with enplanement levels remaining relatively 

flat. However, 2010 was a record year in enplanements at PHF due to increased number of 

GSA city pairs, the introduction of Frontier Airlines, and both Delta Air Lines and US Airways 

increasing frequencies into the ATL and CLT hubs.

C.1 Historical Capacity

The leveling off of historical enplanements though is not due to saturated demand in the 

market place, but rather a function of decreasing seat capacity. This was a result of industry 

consolidation and aggressive capacity control by the carriers due to unpredictable fuel prices. 

Figure 2 presents a comparison between the rolling 12-month total annual departing seats, 

passenger enplanements and daily departures at PHF from December 1990 to December 2011. 

Not surprisingly, the historic seat capacity and number of daily departures out of PHF follow a 

similar pattern as the annual enplanement levels, particularly in the early 2000s when PHF was 

seeing record growth in enplanements. The peak 12-month period of departing seats occurred 

in April 2007 (May 2006-April 2007 period) when 858,700 seats departed the airport on 

10,570 departures for an average aircraft size of 81.2 seats/departure. At this point of time, 

the PHF-wide load factor was 62.1%, which was below the national average. In 2008, when 

industry consolidation coupled with record fuel prices forced airlines to restrict capacity, PHF 

saw a contraction in available capacity. There has been a 12.3% reduction in departing seats 

since the peak which, coupled with an increasing enplanement level, has increased the average 

load factor to 72.3%.

C.2 Forecasted Capacity

The forecasted seat capacity out of PHF for the next year demonstrates the impact that the 

loss of AirTran Airways and the subsequent seat reduction by Delta Air Lines will have on 

PHF’s ability to provide adequate service to the region. Prior to the withdrawal of AirTran 

Airways, PHF had approximately 62,750 monthly departing seats. In April 2012, which was 

the first full month post AirTran Airways withdrawal, this decreased to 29,700 monthly 

departing seats. As can be seen in Figure 3, the remainder of 2012 and first half of 2013 have 

an average of 31,300 monthly departing seats. On a rolling 12-month basis, this equates into 

a total of 375,400 seats for the period April 2012-March 2013, which represents the first full 

12-month period absent AirTran Airways in the PHF market. This represents a 56.3% decline 

from the peak number of departing seats in April 2007.

C.3 Historical Fares

Much of the growth in passenger enplanements since 1998 at PHF was due to the presence of 

AirTran Airways and the fare discipline that resulted from the presence of a low fare carrier in 

the market. AirTran Airways had the positive effect of lowering air fares in the region while 

also providing much needed connectivity to popular origination/destination cities such as

New York City, Boston and Orlando.
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 7

Figure 4 (see Page 8) compares the historical one way gross airfare out of PHF against the 

national one way gross fare from 1Q2000 to 4Q2011. As can be seen in the graph, the one 

way gross historical airfare out of PHF has traditionally been lower than the national one way 

gross fare. However in the period ending 4Q2008, the average one way gross fare out of PHF 

eclipsed the national average and has remained higher than the national average in every 

quarter since then. Since 4Q2008, the PHF average one way gross fare is $179.75 compared to 

the national one way gross fare of $168.35, or 6.8% greater. The trend of PHF having higher

average one way gross airfares than the national average is anticipated to continue in the near 

future due to the withdrawal of AirTran Airways out of the PHF market. The fare discipline of 

AirTran Airways resulted in the PHF average one way gross fare being 11% below the average 

one way gross fare out of ORF. 

The aggressive competition between AirTran Airways and Delta Air Lines on the ATL route 

and the nonstop AirTran Airways flights to the LGA and BOS markets were the primary 

reasons for the lower one way gross airfare out of PHF. To illustrate this, the average Delta 

Air Lines ticket out of PHF to ATL was $52 lower than the average Delta Air Lines ticket 

between ORF-ATL between 2002 and 2011. Furthermore, the average one way gross airfare 

between PHF-LGA on AirTran Airways was $56 lower than the US Airways nonstop average one 

way gross airfare between ORF-LGA. Similarly, PHF-BOS average one way gross fare was $61 

lower on AirTran Airways than the average one way gross airfare out of ORF.

C.4 Present Day Fares

Absent the presence of AirTran Airways in the PHF market and the lost fare discipline, one 

could expect the average one way gross airfare to increase going forward. Figure 5 compares 
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Small Community Air Service Development Grant Program

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Application Under

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the average roundtrip itinerary fare (e.g. the total fare paid by the customer inclusive of 

government taxes and fees) between 1Q1995 and 3Q2001. This timeframe covers the period 

during which PHF was the only airport in the region that had a low cost carrier. This could 

serve as a useful proxy for future airfare decisions by carriers out of PHF now that ORF and 

RIC have low cost carrier connectivity to the destinations PHF lost as a result of the AirTran 

Airways withdrawal. Between 1Q1995 and 3Q2001, the average roundtrip airfare out of PHF 

was $45 lower than ORF and $105 lower than RIC. 

To determine how carriers are currently pricing flights out of PHF, airline websites for a 7-day, 

14-day and 30-day booking window to ATL, LGA and BOS were queried.4 The results suggest 

that passengers flying out of PHF are paying much higher fares than a comparable ticket out 

of ORF. The average 7-day advance purchase between PHF and LGA, BOS and ATL on Delta 

Air Lines is $577 more expensive than comparable tickets booked out of ORF. Tickets booked 

on US Airways 7-days in advance are more in-line between ORF and PHF with PHF booked

tickets $133 more expensive. This trend holds true when examining 14-day and 30-day 

advanced purchase tickets with Delta Air Lines tickets purchased out of PHF being $360 more 

expensive 14-days out from travel and $223 

more expensive 30-days out. Tickets 

purchased on US Airways are $50 more 

expensive 14-days out and $40 more expensive 

30-days out. Overall, the average fare 

discrepancy for travel between PHF and ATL, 

LGA and BOS was $230 more expensive than 

travel between ORF and ATL, LGA and BOS.

Broadening this analysis to the Top 5 AirTran 

Airways connecting cities out of PHF (HOU, 

FLL, LAS, MDW and DFW) for YE4Q2011 

further supports the conclusion that 

passengers flying out of PHF over the ATL or 

CLT hub are paying higher fares.5 Fares to the 

Top 5 AirTran Airways cities for this 

timeframe averaged $326. Based on 30-day 

advance purchase on either Delta Air Lines or 

US Airways, the average itinerary fare is $502, 

or a nominal increase of $176. A 30-day 

advance purchase window is typically a leisure 

or discretionary business passenger. As the 

purchase window closes, fares will increase 

exponentially.

D. Proposed Use of Funds

PHF has two service gaps that are the focus of 

current air service development initiatives: 

 

4 The individual queries were based on business passenger preferred departure times (0800 hours from PHF and 1700 

hours on the return trip). Tickets were restricted economy tickets and did not include any special pricing promotions. 

Analysis was conducted on June 4, 2012 and used the following dates: 7-day advance purchase departing PHF on 

June 11 and returning on June 13. 14-day advance purchase departing PHF on June 18 and returning on June 20. 30-

day advance purchase departing PHF on July 9 and returning on July 11.

5 MDW and HOU destinations were substituted with IAH and ORD respectively.
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Page 11

1) replacing lost service to New York City and Boston and 2) increasing hub connectivity thru 

increased seat capacity and frequency to the CLT hub and by establishing new nonstop service 

to hub airports in the Ohio Valley, Upper Midwest and South Central portions of the United 

States (USDOT WAC Regions 4, 6 and 7)6. We recognize that the three New York airports are 

capacity controlled and carriers will require significant justification to use valuable slots to 

serve the PHF market. To illustrate these service gaps, Figure 6 depicts the Top 48 O+D 

markets out of PHF for the year ending December 31, 2011 and identifies which markets are 

currently served by a nonstop flight and which markets were lost when AirTran Airways

withdrew from the market on March 10, 2012. 

Prior to AirTran Airways withdrawing from the market, PHF served 5 of the Top 10 O+D city 

pairs with nonstop flights (ATL, LGA, BOS, MCO and DEN) with direct competition on the 

Atlanta route being provided by AirTran Airways and Delta Air Lines. After the departure of 

AirTran Airways, PHF serves 2 of the Top 10 city pairs (ATL and DEN) with no direct 

competition on either route. It should be noted that Allegiant Airways backfilled the Orlando 

market when it initiated service in November 2011 to Orlando-Sanford International Airport

(SFB). It is fully anticipated that the Orlando-Sanford market will be included in the Top 10 city 

pairs by the end of this calendar year.

 

D.1 Economic Model

The following sections present the results of a modeling effort conducted by PHF staff that 

attempts to quantify the lost efficiency and disutility of passenger’s time resulting from the 

lost nonstop flights to the New York City and Boston markets as well as the lack of hub 

connectivity in the Ohio Valley, Upper Midwest and South Central portions of the United 

States. The model first quantifies the inefficiency of the route using the following formula:

 

 

 

The lower the product the more inefficient the route is in terms of trip miles

The second portion of the model attempts to quantify the value of the disutility of time 

experienced by the passenger. Time saved in travel has an economic value to passengers for 

two reasons. First, the time may be devoted to other activities preferred by the traveler, such 

as remunerative work in the case of a business passenger. Second, if the travel is associated 

with unpleasant conditions (e.g. crowded aircraft, terminals or delays); then reducing travel 

time will be perceived as a positive for the traveler.7 For example, passengers flying out of 

PHF to the New York City and Boston markets experience longer flight times due to the 

introduction of a hub connection, which results in a perceived disutility in flying out of PHF 

over competing nonstop service offered out of ORF by Delta Air Lines. To quantify the 

passenger valuation of the disutility of time, the total enroute time thru the ATL, CLT and PHL 

hubs were compared to the nonstop enroute time currently offered from ORF.

8 Additional 

 

6 WAC Region 4 consists of the states of Michigan, Ohio, Indiana, Illinois and Wisconsin. WAC Region 6 consists of the 

states of Minnesota, Iowa, Missouri, Kansas, Nebraska, South Dakota and North Dakota. WAC Region 7 consists of the 

states of Arkansas, Louisiana, Texas and Oklahoma.

7

“The Value of Saving Travel Time: Departmental Guidance for Conducting Economic Evaluation”, USDOT Report 

dated April 9, 1997.

8 Passenger value of time was estimated by applying an inflation rate of 2.7% which is equal to the CPI-U for the

Washington D.C.-Baltimore region to the reported business and leisure intercity travel value of time in “The Value of 

Saving Travel Time: Departmental Guidance for Conducting Economic Evaluation” published by the USDOT on April 9, 

1997. 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 12

factors that were included in the model addressed business/leisure travel split and connection

times in the hub.9 

D.2 Loss of Nonstop New York City/Boston Service

The lack of nonstop service to the New York City and Boston markets represents a significant 

economic impact to the region. Post AirTran Airways departure, the travelling public from 

PHF suffers from a hub connectivity penalty by having to connect thru ATL via Delta Air Lines

or thru CLT or PHL via US Airways to reach New York or Boston.

Figure 7 presents annual passengers and one way average fare on AirTran Airways to LGA and 

BOS from YE4Q2006 to YE4Q2011. During this period, the PHF market combined averaged 

275 daily passengers to LGA and BOS markets with an average one way fare of $117. Despite 

a decline in total passengers, the annual revenue generated on the route by AirTran Airways 

increased $775,000 from $8.9 million in 2006 to $9.7 million in 2011.

LaGuardia Market – Hub Connectivity Penalty

Based on YE4Q2011, US Airways had a 2.5% share of the PHF-LGA market with PHL being the 

preferred hub connection. The total air miles between PHF and LGA nonstop is 288 miles 

 

9

In business intensive markets (LGA, ORD), the split was assumed to be 60% business/40% leisure. In leisure intensive 

markets the split was 40% business/60% leisure. All other markets were assumed to have a 50%/50% split. Fully 

loaded hourly rate for business passengers was determined by applying an overhead factor of 3.0. Leisure passenger 

hourly rates were not adjusted. Total travel time is equal to the block time only and does not include any time 

associated with travel to/from the airport or time at the airport prior to aircraft departure. Lastly, a hub productivity 

discount was applied to the business passenger value of time spent in the hub. The discount was determined by 

taking the number of minutes above 40 minutes in the hub and dividing by 60 minutes. To control for excessively 

long connection times, the maximum discount was 50% which equates into a 70 minute connection. It is believed that 

connection times below 40 minutes and above 70 minutes represent higher disutility due to either worry over missing 

the connection or having an excessively long connection time.
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while total air miles between PHF-PHL-LGA route is 294, or a 2% hub connect penalty over the 

nonstop PHF-LGA route. 

On the surface, this appears rather minor, but another viewpoint is to consider the increased 

travel time between PHF and the New York City markets. The two daily flights AirTran 

Airways offered between PHF and LGA departed PHF at 8:00a arriving LGA at 9:14a and 

departing PHF at 4:49p arriving LGA at 5:59p for an average block time of 1 hour and 12 

minutes. The most efficient block time thru PHL on US departs PHF at 5:43a arriving in PHL at 

6:52a then departing PHL at 7:24a and arriving at LGA at 8:30a for a total block time of 2 

hours and 47 minutes. Thus, a roundtrip between PHF and LGA on US Airways thru PHL 

increased travel time by 3 hours and 10 minutes. 

Enroute time on the nonstop LGA flights offered by AirTran Airways and connecting flights 

offered by US Airways totaled 58,000 person hours which resulted in an economic valuation of 

$12.2 million dollars YE4Q2011. On a per passenger basis, this equates into approximately 

$261.92 in lost productivity due to travel time. Quantifying the CY2012 lost economic value 

of time based on passengers flying thru the ATL hub on Delta Air Lines or thru the PHL/CLT

hubs for US Airways results in a total value of the disutility of time of $28.1 million or 

$616.75 per passenger. As a result, it is estimated the loss of nonstop AirTran Airways

service to LGA results in an increased passenger valuation of the disutility of time of $16.6

million per year.

Boston Market – Hub Connectivity Penalty

Based on YE4Q2011, US Airways had a 6.5% share of the PHF-BOS market with PHL being the 

preferred connecting point, although 30% of US passengers are connecting over the CLT hub. 

The total air miles between PHF and BOS nonstop is 464 miles while total air miles between 

PHF-PHL-BOS route is 480, or a 3.3% hub connect penalty over the nonstop PHF-BOS route. For 

those passengers connecting over the CLT hub, the penalty is 54% as the total air miles on a 

PHF-CLT-BOS route is 1,008 miles. 

Similar to the LGA market, the hub penalty over the PHL hub appears rather minor, but the 

increased travel time between PHF and the BOS market also exhibits a lack of efficiency. The 

two daily flights AirTran Airways offered between PHF and BOS departed PHF at 6:45a arriving 

BOS at 8:12a and departing PHF at 5:29p arriving BOS at 7:00p for an average block time of 1 

hour and 29 minutes. The most efficient block time on US Airways thru PHL departs PHF at 

9:25a arriving in PHL at 10:35a then departing PHL at 11:15a and arriving at BOS at 12:32p for 

a total block time of 3 hours and 7 minutes. Thus, a roundtrip between PHF and BOS on US 

Airways thru PHL increases travel time by 3 hours and 16 minutes. 

Enroute time on the nonstop AirTran Airways and connecting US Airways flights thru the CLT 

or PHL hubs totaled 70,200 person hours which resulted in an economic valuation of $13.0

million dollars YE4Q2011. On a per passenger basis, this equates into approximately $298.99

in lost productivity due to travel time. Quantifying the CY2012 lost economic value of time 

based on passengers flying thru the ATL hub on Delta Air Lines or thru the PHL/CLT hubs for 

US Airways results in a total value of the disutility of time of $28.0 million or $641.93 per 

passenger. As a result, it is estimated the loss of nonstop AirTran Airways service to BOS

results in an increased passenger valuation of the disutility of time of $14.9 million per 

year.

10

 

10 While the BOS flight had a higher number of total person hours than the LGA flight, the total passenger valuation of 

disutility of time was lower. The reason for the apparent discrepancy is due to the higher business passenger split on 

the LGA route and the higher valuation placed by business travelers on their time. 
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Combined Impact on Passenger Valuation of Disutility for LGA and BOS Markets

On a combined basis, the nonstop PHF-LGA and PHF-BOS routes offered by AirTran Airways

represented a combined passenger valuation of the disutility of time of $25.3 million which 

has increased to $56.8 million due to additional travel time associated with hub connections

in ATL, CLT or PHL. This is a nominal increase in disutility valuation of $31.5 million.

D.3 Lack of Hub Connectivity

The second service gap that exists at the airport is the constrained capacity into the CLT hub 

and a lack of connectivity to a hub in USDOT WAC Regions 4, 6 and 7. As of YE4Q2011, 20% 

of the Top 10 O+D city pairs (DFW and IAH), and 35% of the Top 20 city pairs (DFW, IAH, HOU, 

ORD, SAT, STL and MSP) are located in the Ohio Valley, Upper Midwest or South Central 

portions of the United States. Demand to the heartland from PHF is fairly high with 

approximately 23% of all YE4Q2011 originating passengers at PHF bound for destinations in 

USDOT WAC Regions 4, 6 or 7 (see Figure 8). However, as can be seen in Figure 9, the 

percentage of Southeast Virginia demand (defined as the O+D demand generated by the RIC, 

PHF and ORF markets combined) that is captured by PHF is low for each of the five heartland 

hubs and for the CLT hub. PHF generally captures between 5-percent and 23-percent of 

regional demand primarily due to the fact that both RIC and ORF have 53.6 daily nonstops to 

the six airports with an average aircraft size of 72.6 seats in June 2012. 

To determine which hubs would reduce the disutility of time for passengers at PHF, a hub 

connectivity analysis was conducted. The economic valuation of passenger disutility of time

for a new nonstop service to a heartland hub was determined based on several assumptions. 

First, the carrier offering nonstop service would gather 80% market share. Second, the 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 15

remaining market share would be retained by the existing carrier(s) with passenger flow to the 

carrier’s hub(s) remaining proportionate to existing conditions. Third, in order to effectively 

compare the pre-nonstop and post-nonstop economic valuation of disutility, the model did 

not include market stimulation. Rather, the model simply reallocated YE4Q2011 passengers 

and thus should not be interpreted to represent a full post-nonstop market demand. In 

actuality, the stimulative effects of a new nonstop flight to a previously un-served market 

would overstate the economic valuation of disutility since more passengers would be flying 

and thus more person hours included in the model. The economic valuation did not include 

the up-gauging of aircraft into the CLT hub as PHF currently has nonstop connectivity to CLT.

Detroit Metro Wayne Airport (DTW)

The first hub analyzed was the lack of nonstop connectivity to DTW. For the YE4Q2011, a 

total of 2,229 originating passengers at PHF were terminating at DTW. The predominant 

routing for originating PHF passengers was over the CLT hub for US Airways with the 

secondary routing over the PHL hub for US Airways. There were no reported passengers 

connecting over the ATL hub on either Delta Air Lines or AirTran Airways. Enroute time on 

the US Airways flights totaled 8,166 person hours which resulted in an economic valuation of 

$1.52 million dollars YE4Q2011, or $682.18 per passenger. 

A nonstop PHF-DTW route would carry 1,783 passengers and reduce the roundtrip travel time 

from the current 7 hour 20 minute average per passenger to a 4 hour 4 minute average per 

passenger and would reduce the disutility valuation by $639,000 per year. The introduction 

of a new nonstop service, coupled with some passengers continuing to connect thru the CLT, 

PHL or ALT hubs to reach DTW, results in a cumulative passenger disutility of time valuation 

of $395.18 on a roundtrip basis. 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 16

Chicago O’Hare (ORD)

The second hub analyzed was the lack of nonstop connectivity to ORD. For the YE4Q2011, a 

total of 6,683 originating passengers at PHF were terminating at ORD. The predominant 

routing for originating PHF passengers was over the CLT hub for US Airways with the 

secondary routing over the ATL hub for Delta Air Lines and the tertiary routing over the PHL 

hub for US Airways. The enroute time for all passengers flying thru the CLT, ATL and PHL 

hubs totaled 27,543 person hours and yielded an economic valuation of $5.43 million dollars 

YE4Q2011, or $813.21 per passenger. Similar to the LGA route, the ORD route had a 60% 

business passenger demand and 40% leisure passenger demand.

A nonstop PHF-ORD route would carry 5,346 passengers and reduce the roundtrip travel time 

from the current 8 hour 14 minute average per passenger to a 4 hour 36 minute average per 

passenger and would reduce the disutility valuation by $2.18 million per year. The 

introduction of a new nonstop service, coupled with some passengers continuing to connect

thru the CLT, PHL or ALT hubs to reach ORD, results in a cumulative passenger disutility of 

time valuation of $487.74 on a roundtrip basis. 

Minneapolis-St.Paul (MSP)

The third hub analyzed was the lack of nonstop connectivity to MSP. For the YE4Q2011, a 

total of 5,890 originating passengers at PHF were terminating at MSP. The predominant 

routing for originating PHF passengers was over the ATL hub for Delta Air Lines and AirTran 

Airways with the secondary routing over the CLT hub for US Airways and the tertiary routing 

over the PHL hub for US Airways. The enroute time for all passengers flying thru the CLT, ATL 

and PHL hubs totaled 29,836 person hours and yielded an economic valuation of $5.49 million 

dollars YE4Q2011, or $933.33 per passenger. 

A nonstop PHF-MSP route would carry 4,712 passengers and reduce the roundtrip travel time 

from the current 10 hour 8 minute average per passenger to a 6 hour 24 minute average per 

passenger and would reduce the disutility valuation by $1.72 million per year. The 

introduction of a new nonstop service, coupled with some passengers continuing to connect 

thru the CLT, PHL or ALT hubs to reach MSP, results in a cumulative passenger disutility of 

time valuation of $641.39 on a roundtrip basis. 

Dallas/Ft. Worth (DFW)

The fourth hub analyzed was the lack of nonstop connectivity to DFW. For the YE4Q2011, a 

total of 13,923 originating passengers at PHF were terminating at DFW. The predominant 

routing for originating PHF passengers was over the ATL hub for Delta Air Lines and AirTran

Airways with the secondary routing over the CLT hub for US Airways and the tertiary routing 

over the PHL hub for US Airways. The enroute time for all passengers flying thru the CLT, ATL 

and PHL hubs totaled 67,604 person hours and yielded an economic valuation of $12.54

million dollars YE4Q2011, or $900.56 per passenger. 

A nonstop PHF-DFW route would carry 11,138 passengers and reduce the roundtrip travel 

time from the current 9 hour 43 minute average per passenger to a 6 hour 50 minute average 

per passenger and would reduce the disutility valuation by $3.34 million per year. The 

introduction of a new nonstop service, coupled with some passengers continuing to connect

thru the CLT, PHL or ALT hubs to reach DFW, results in a cumulative passenger disutility of 

time valuation of $660.42 on a roundtrip basis. 

Houston Intercontinental (IAH)

The last hub analyzed was the lack of nonstop connectivity to IAH. For the YE4Q2011, a total 

of 8,784 originating passengers at PHF were terminating at IAH. The predominant routing for 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 17

originating PHF passengers was over the ATL hub for Delta Air Lines and AirTran Airways with 

the secondary routing over the CLT hub for US Airways and the tertiary routing over the PHL 

hub for US Airways. The enroute time for all passengers flying thru the CLT, ATL and PHL 

hubs totaled 40,123 person hours and yielded an economic valuation of $7.24 million dollars 

YE4Q2011, or $824.16 per passenger. 

A nonstop PHF-IAH route would carry 7,027 passengers and reduce the roundtrip travel time 

from the current 9 hour 10 minute average per passenger to a 6 hour 18 minute average per 

passenger and would reduce the disutility valuation by $2.18 million per year. The 

introduction of a new nonstop service, coupled with some passengers continuing to connect 

thru the CLT, PHL or ALT hubs to reach IAH, results in a cumulative passenger disutility of 

time valuation of $575.96 on a roundtrip basis. 

Conclusion: Heartland Hub Analysis

Figure 10 summarizes the results of the passenger valuation of disutility analysis. The most 

efficient heartland hubs within the Ohio Valley, Upper Midwest or South Central regions of the 

United States for connection, in terms of decreasing the passenger valuation of disutility of 

time, is either Dallas-Ft. Worth International Airport with a $3.5 million dollar decrease or 

Chicago-O’Hare International Airport with a $2.3 million dollar decrease. 
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 18

E. Project Proposal

As with the case of many small hub airports across the country, the shifting airline industry 

has caused tremendous difficulty in attracting new air service. Carriers are relentlessly 

focused on maintaining the costs the can control at a minimum and have come to the 

conclusion that the quickest way to improve their bottom line is to maximize asset utilization 

and have strict capacity controls. To illustrate this, total flying hours in CY2011 by carriers 

required to file on DOT Form 41 was 24% lower than CY2010. Additionally, the consolidation 

of the industry either through acquisition or merger has resulted in an unprecedented level of 

market power by the carriers.11

As such, small hub airports have to change the dynamics of air service development by closing 

the perceived opportunity cost of carrier’s initiating service. The objective of our proposal 

then is to reduce the costs of prospective carriers by lowering the barriers to entry thru

sharing the financial risk of initiating service to PHF. In particular, the Peninsula Airport 

Commission would utilize departmental funding thru a SCASD grant to 1) reestablish lost 

New York and Boston service, 2) up-gauge aircraft into the CLT hub and 3) to establish a 

new connection to Chicago-O’Hare and/or Dallas-Ft. Worth. 

E.1 Funding Mix

The proposed funding mix for the grant application includes direct and non-direct airport 

funds in the form of advertising and waived landing and terminal fees, regional commitment 

from a consortium of Economic Development Agencies that form a regional partnership and 

USDOT grant funds. Our total grant request from DOT is for $2,000,000.

 

11 A commonly held measurement of market power that is used by the Department of Justice is the HerfindahlHirschman Index (HHI) which is used by the DOJ and FTC in horizontal merger reviews. According to the DOJ/FTC 

Horizontal Merger Guidelines, any industry is highly concentrated if the HHI is above 2,500 points. The DOJ/FTC 

considers any proposed merger that moves the HHI by more than 200 points in highly concentrated industries to be 

worthy of additional scrutiny. The HHI for all FAA defined small, medium and large hub airports was calculated by 

PHF staff at 2,862 for CY2005, ostensibly before industry consolidation, and for CY2010 at 2,990. Additionally, 42% 

of all small, medium and large hub airports had a negative (e.g. towards more concentration and higher HHIs) shift in 

market concentration above 200 points in the same timeframe.

PARTNER INVESTMENT

%

OF TOTAL

Airport Funds $400,000 11%

Marketing/Advertising Support $275,000

Waiver of Landing/Terminal Fees $125,000

Regional Air Service Enhancement (RAISE) $1,200,000 33%

USDOT Grant Award $2,000,000 56%

TOTAL $3,600,000 100%
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 19

The airport will provide 11% of total grant request with local funding providing 33% of the 

request. Thus, the community is ready and willing to invest $1.6 million in matching funds 

to attract much needed air service to the region.

E.2 Grant Form

The grant funds will be used to attract a carrier(s) to provide nonstop jet service to one or 

more of the targeted destinations indicated above. The program will be for 12 months. At 

the end of the period, any unused federal grant funds will be relinquished back to the 

Department.

The majority of program funds will be allocated as a revenue guarantee for the carrier(s). Due 

to 1) the lack of nonstop service, 2) the cutbacks in incumbent capacity and 3) the previous 

success of nonstop LGA and BOS service out of PHF; it is strongly felt that the new service will 

be revenue-positive shortly after the start of operations. The relative success of the New York 

City and Boston markets are demonstrated by the historical daily passengers to these markets 

as illustrated in Figure 7 (see Page 12). To determine the potential for new nonstop service to 

DFW and ORD, PHF has historically captured 30% of the historical SEVA regional O+D demand 

to the world’s largest hub airport (ATL). Assuming that this capture rate is achieved for ORD, 

CLT and DFW hubs; the PHF market could generate a total of 192 daily O+D passengers to 

these markets (in addition to the number of daily passengers connecting over the hubs). 

However, given the fact that US carriers are not expanding their fleet, and are flying their 

existing fleet less frequently, an incentive program designed to help offset the opportunity 

costs of moving an existing aircraft – or reducing frequency into – a particular market will be 

necessary. 

The airport will negotiate a strict agreement with the target carrier outlining the following:

 The agreed upon cost for each segment operated, including a profit hurdle.

 The agreed upon allocation of revenues and ancillary fees. Local revenues on the flight 

will be allocated fully. Connecting revenues will be allocated based on an agreed 

prorate.

 The revenues and costs will be accounted for on a yearly true-up basis. Any shortfall 

between agreed-upon revenues and costs will be paid in arrears to the carrier. Any 

surplus will be accrued to the next accounting period.

Using this model, the airport was successful in attracting Frontier Airlines to the airport in 

Spring 2010. The revenue guarantee for Frontier totaled $1.2 million of which the carrier has 

used $200,000 to offset changing route economics due to a combination of long stage length 

and record high fuel prices. Considering the stage length of the flight, and the fact that a 

roundtrip flight from DEN to PHF effectively ties up an aircraft for the day; the route has 

performed very well. As mentioned earlier, we have every expectation that the LGA, BOS and 

additional hub connectivity would perform well out of PHF based on historical performance at 

PHF.

E.3 Marketing Plans

As part of our standard air service development policy, PHF offers support for any new service 

on a certificated carrier to the airport to a city that is not currently served or to a new carrier 

entering the market. Marketing support to any new service generally includes:

 Outdoor
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 20

 Radio

 Newspaper

 Television

 Internet/Social Media

 Speaking Circuit

 Cooperative marketing with area attractions

 Direct marketing to area businesses.

The marketing campaign to promote a new city launch would include: 1) a media blitz with 

press conferences, ribbon cutting and news interviews throughout the region; b) co-sponsored 

promotional reception for travel agents, business and hospitality leaders and c) inclusion in 

promotional opportunities at Chamber events and in collateral materials.

Additionally, the airport will abate landing fees, ticket counter charges, and joint use charges 

for 12 months.

E.4 Post-Program Support

To ensure the success of new service, Peninsula area businesses through the Newport News 

Economic Development Authority created RAISE (Regional Air Service Enhancement). RAISE is 

made up of economic development leaders from 7 municipalities:

1. City of Newport News

2. City of Hampton

3. James City County 

4. York County

5. City of Williamsburg

6. City of Gloucester

7. City of Poquoson

Together, their support of committing financial resources allows the RAISE to help attract new 

air service.

The airport will provide monthly updates to the appropriate officials to report milestones and 

convey the community’s progress toward meeting the project’s stated objectives (or as 

dictated by the Department of Transportation). In the event that dynamics of the aviation 

industry and/or current negotiations impact the feasibility of the carriers targeted in our 

proposal, the airport will work with the Department to amend its application, keeping 

within the confines of stated air service development objectives.
Application Under

Small Community Air Service Development Grant Program

USDOT Docket DOT-OST-2012-0069

Page 21

F. Letters of Support

In support of our application, we have enclosed letters from the following individuals and 

organizations:

1. Honorable Senator Mark Warner, VA

2. Honorable Representative Rob Wittman, VA-01

3. US Airways



A. APPLICANT INFORMATION (CHECK ALL THAT APPLY)

Not A Consortium

Community Now Receives EAS subsidy

Community (or Consortium member) prevoiusly received a Small Community Grant

If previous recepient: Date of Grant Expiration Date of Grant: N/A

B. PUBLIC/PRIVATE PARTNERSHIPS (LIST ORGANIZATION NAMES):

PRIVATE

1 1

2 2

3 3

4 4

5 5

C. PROJECT PROPOSAL (CHECK ALL THAT APPLY)

D. EXISTING LANDING AIDS AT LOCAL AIRPORT:

Regional Air Service Enhancement (RAISE)

Intrastate Consortium

PUBLIC

Interstate Consortium

Federal Funds Requested:

Carrier(s) Service Obtained:

Destination(s) Served:

N/A

Start-Up Cost Offset

Secure Additional Service

Marketing

Travel Bank

Surface Transportation

Launch New Carrier

Published Instrument Approach

All applicants must submit this information with their proposal, along with a completed Form SF424 on www.grants.gov

SUMMARY INFORMATION

SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGAM

DOCKET DOT-OST-2012-0069

Full ILS Outer/Middle Marker

New Route

Subsidy

Revenue Guarantee

First Service

Study Other (explain below)

Upgrade Aircraft

Service Restoration

Regional Service

Localizer Other
E. PROJECT COST (DO NOT ENTER TEXT INTO SHADED AREA):

F. IN-KIND CONTRIBUTIONS**

G.

H.

LINE DESCRIPTION SUBTOTAL TOTAL

1 Federal Amount Requested $ 2,000,000

3a. Airport cash funds $ 275,000

3b. Non-airport cash funds $ 1,200,000

2 State cash financial contribution $ -

Local cash financial contribution

In-Kind Contribution

5a. Airport in-kind contribution** $ 125,000

3 TOTAL CASH FUNDS (3a+3b) $ 1,475,000

4 TOTAL CASH FUNDING (1+2+3) $ 3,475,000

6 TOTAL PROJECT COST (4+5) $ 3,600,000

5b. Other in-kind contribution** $ -

5 TOTAL IN-KIND CONTRIBUTION (5a+5b) $ 125,000

For funds in lines 5a (airport in-kind contribution) and 5b (other in-kind contribution), please describe the source(s) of fund(s) for 

each:

Airport in-kind contribution is from waived landing fees and terminal fees.

IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UNDER EXECUTIVE ORDER 12372 PROCESS?

IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF "YES", THEN PROVIDE EXPLANATION)

c. Program is not covered by E.O. 12372

No Yes (please explain below)

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

______________

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