# Proposal Under the Small Community

Air Service Development Program

Docket: DOT

- OST

- 2011

- 0119

Sponsoring Entity: Savannah/Hilton Head International Airport

Dun & Bradstreet Number: 059534529 000

2

- digit Congressional District Code: 01

July 28, 2011Savannah/Hilton Head International Air port

Small Community Air Service Grant Application

– July, 2011



# Executive Summary

The Savannah/Hilton Head International Airport (SAV)

serves the communities of Savannah, GA and Hilton Head

Island, SC. According to the Bureau of Transportation

Statistics, SAV currently has one of the highest average

airfares in the nation.

SAV, by filing this grant application, seeks an award of

$400,000. from the Department of Transportation with the

following goals and objectives in mind: 1. Acquire a low

- cost

carrier 2. Reduce airfares 3. Incr ease capacity 4. Reduce

leakage.

The grant ($400,000), along with contributions from

Savannah/Hilton Head International Airport and the

communities of Savannah and Hilton Head Island would

allow SAV to pursue new carriers and assist with the

tremendous st art up costs incurred with any new service.

High fares at SAV continue to drive significant traffic to

neighboring Jacksonville, FL. Southwest Airlines recent

start

- up in Charleston, SC poses and additional threat of

losing traffic to the north.

SAV has defined its deficiencies and is optimistic that with

the benefit of the grant it will be able to successfully compete

in the SC/GA/FL market.Savannah/Hilton Head International Air port

Small Community Air Service Grant Application

– July, 2011



# Community Overview

Diverse Regional Economy

Tourism

Distribution & Logistics

Manufacturing

Paper Products

Military

Area’s Largest Employers

Gulfstream Aerospace

o Over 6,000 employees

o Recent expansion will add an

Additional 1, 000 jobs in 2012

o #1 Corporate Travel Customer

The Port of Savannah

o Fourth

- busiest and fastest

- growing

container ter m i nal i n the U.S.

o Supports nearly 300,000 jobs

and nearly $80 billion in taxes

o East Coast Distribution center

for several major corporations.Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



### This & That

Mitsubishi Power Systems recently opened

construction a new manufacturing facility.

A project th at brings $325 million in investment

and more that 500 jobs

.

Gulfstream Aerospace is currently in the fifth year of a

seven

- year, $400 million Long Range Facilities Master Plan.

Portuguese manufacturer EFACES’s has invested in a

power transformer manu facturing plant in nearby Rincon,GA.

Since 2009, nearly a dozen industries either

located new facilities in the area or

announced major expansions, bringing close

to $500 million in investment and the

promise of as many as 1,500 new jobs.

Military Inv olvement & Presence

Home to two bases employing more than

42,000

Savannah/Hilton Head International awarded

contract by the US Marines t o act as receiving

port to all incoming trainees to Paris Island

Marine Corp Station, SC.

o Approximately 20,000 trai nees and 10,000 family and

friends arrive annually.

Over 50,000 military personnel & dependents currently in

Savannah areaSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



### Tourism

– Savannah Area

Tourists had direct spending of $1.7 Billion

More than 6.5 million visitors annually

14,964 Rooms

- Luxury Hotels/Historic Inns

One of the Largest National Historic Districts

Tourism

– Hilton Head Island

2.5 million overnight visitors annually

Tourism brings over $1 billion in

e conomic impact to the area

9,000 rooms: home/villa rentals and

resort hotel accommodations

Travel and tourism is the #1 economic

d river for Hilton Head Island and for the

State of South CarolinaSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# A ir Service Overview

Historical Service

Since realizing a record number of enplanements in 200 5 & 2007, air

traffic has decreased at SAV by double digits through 2009 with a

very slight increase in 2010 (See Exhibit 1) Con tributing factors were:

loss of service by AirTran, loss of non

- stop destinations by current

carriers, reduction of flights, and capacity reductions.

Exhibit 1: Enplaned passengers past five yearsSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011

Source: Savannah/Hilton Head International Airport



### The airport growth in 201 1 remains slightly above flat, based on:

current airline fuel prices, airline’s continued reduction of capacity,

and the lack of any additional air service by a current legacy carrier or

new entry by a low c ost carrier. (See Exhibit 2).

Exhibit 2: Enplaned Passengers YTD as of June 201 1 vs 20 10

Source: Savannah/Hilton Head International Airport



### The charts below show the enplanement history by carrier (See

Exhibit 3) and also t he capacity by destination (See Exhibit 4).

Exhibit 3: Passenger Enplanement History by Carrier

2006 2007 2008 2009 2010

Allegiant 1,122

American Eagle 32,754 34,185 45,401 52,665 49,445

AirTran 89,839 94,940 62,450

Charter 321 366 383 7 90 1,897

CO Express/Express Jet 77,456 77,869 87,758 74,225 71,114

Delta 348,371 343,265 356,262 247,429 241,441

DL Connection/Comair 80,663 81,431 69,102 48,627 11,012

DL Connection/Chautauqua 5,169 9,591 3,893 11,459 40,263

DL Connection/ASA 20,064 19,164 4,885 59,165 62,067

DL Connection/Shuttle

America 1,859 3,070 1,155 7,596

DL Connection/Pinnacle 660 11,323 45,211

DL Connection/Sky West 255Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011

DL Connection/Compass 5,749

Independence Air 603

Northwest 5,889 13,307

N W Airlink/Pinnacle 30,559 18,172 52,925 23,480

United Express Jet 2,351 18,762 16,196

UA Express/ASA 48,920

UA Express/Mesa 68,273 87,669 71,374 48,467 19,821

UA Express/SkyWest 48,897 28,757 25,877 1,131

UA Express/Air Wisconsin 21,873

UA Express/Trans States 9,438 29,236 14,917

US Airways 51,849 58,636 49,370 11,448 3,141

US Air Express/PSA 15,574 38,928 44,766 45,702 47,225

US Air Express/Air Wisconsin 18,978 7,354 4,375 14,576

US Air Express/Mesa 66,070 56,750 38,758 68,8 42 69,174

US Air Express/Piedmont 430 957 590 8

US Air Express/Republic 2,986 19,933 50,036 61,406 64,578

US Air Express/Chautauqua 6,585 1,859 149

967,210 1,010,815 988,929 820,426 835,728

Exhibit 4: Airline and Destination Capac ity History (average seats per week)

3Q06 3Q07 3Q08 3Q09 3Q10

American Airlines Dallas/Ft Worth, TX 793 980 1,027 1,330 1,050

American Airlines Miami, FL 448 448 448

Continental Airlines Cleveland, OH 466.7

Continental Airlines Newark, NJ 1 ,164 1,087 1,204 988 983

Continental Airlines Houston Intercontintal 900 1,017 1,000 933 933

Delta Air Lines Atlanta, GA 10,095 9,738 9,137 8,502 9,071

Delta Air Lines Boston, MA 350 367

Delta Air Lines Cincinnati, OH 817 926 700 650

Delta Air Lines Washington

- National, DC 17

Delta Air Lines Detroit, MI 738

Delta Air Lines New York

- La Guardia, NY 950 1,150 983 967 1,000

Air Tran Airways Atlanta, GA 2,730 2,379 1,638 Srvc End 10/08

Northwest Airlines Detroit, MI 700 350 350 3 59

Northwest Airlines Memphis, TN 100 67 1,050

Northwest Airlines Minneapolis, MN 50 33 17

United Airlines Washington

- Dulles, VA 1,321 1,083 1,353 1,267 1,464

United Airlines Chicago

- O'Hare, IL 1,557 1,451 1,387 1,152 1,219

US Airways Boston , MA 83

US Airways Charlotte, NC 4,221 5,378 4,297 4,193 4,441

US Airways Washington

- National, DC 148 222 76 86 150

US Airways New York

- La Guardia, NY 50 567 371 507

US Airways Philadelphia, PA 241 623 566 644 795

US Airways Pittsburth, PA 4 8 216

Total 52,641 55,243 52,155 44,053 44,585

Source: APGDat Internet

- Based Aviation Data as of 07/01/2010Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# Current Service

SAV has non

- stop service to eleven airports in ten cities, with hub

connections to every major airline (see Exhibit 5 & Exhibit 6).

Exhibit 5: Current Air Service Map as of 07/25/2011

Exhibit 6: Current Air Service as of July 29 , 201 1

Airline Destination Equipment

Type Flights/Day Seats/Day

American Eagle Dallas/Ft Worth, TX Regional Jet 3 150

American Eagle Miami/ FL Turbo

- prop 1 64

Continental Express Houston

- Inter, TX Regional Jet 3 150

Continental Express Newark, NJ Regional Jet 3 150

Delta Air Lines Atlanta, GA Narrow Body 10 1400

Delta Connection Atlanta, GA Regional Jet 1 50

Delta Connection Detroit, MI R egional Jet 2 100

Delta Connection New York

- La Guardia, NY Regional Jet 3 150

United Express Chicago

- O'Hare, IL Regional Jet 3 150

United Express Washington

- Dulles, VA Regional Jet 4 200

US Air Express Charlotte, NC Regional Jet 8 636

US Air Express P hiladelphia, PA Regional Jet 1 76Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011

Source: Savannah/Hilton Head International Airport 8/1/10



# Efforts to Improve Air Service

In 1997 the Savannah Hilton/Head International Airport approved an

air service incentive package. The plan offered $50,000 in mar keting

assistance for any new or additional flights into the Savannah/Hilton

Head area. The Airport was able to secure air service from

Continental Airlines and United Airlines the following year

.

In 1999, the Airport successfully lobbied for and received operating

slots at the Chicago O’Hare Airport. It was the first time a non

- airline

had received the slots. This resulted in non

- stop service provided by

United Express.

In 200 4/2005 , NW Airlink added service to Memphis

, Continental

Express added service to Cleveland, and Independence Air began

service to Washington DC, all due to the incentives offered through

the Small Community Air Service Grant awarded to The

Savannah/Hilton Head International Airport.

In 2010, The Savannah Airport Commission amended the incentive

package (see Exhibit 7) in an effort to add a low cost carrier and

increase capacity.

Ex hibit 7: 2010 Air Service Incentive Package



### Air Service Development Program

.

Objective: The Air Service Development Program (ASDP) of the

Savannah Airp ort Commission (SAC) outlines the range

of options available to the Airport Staff in seeking to

develop new air service.

Introduction: The SAC has established the ASDP as a tool for the

Staff to use in developing new airline services by offering

incentive s to incumbent and new entrant airlines for

additional new air service at the Savannah/Hilton Head

International Airport.Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



### The Program:

1) For new, nonstop service to an existing destination

currently being served by an incumbent carrier, the

following r anges of options are available:

Marketing assistance of $50,000 per flight up to a

maximum of $150,000.

2) For new, nonstop service by an incumbent or new

entrant carrier to a new location not currently being

serviced:

Marketing assistance of $50,000 pe r flight up to a

maximum of $200,000.

Waiver of one or more of the following fees/rents for a

period of twelve (12) months.

~ Landing fees for the expanded portion of the service.

~ Ticket counter, Holdroom, gate and apron fees/rents as

a result of the e xpanded service.

~ Common area charges (baggage claim, concourse,

public areas) associated with the expanded service.

Assistance with start

- up costs (installation of counter,

communications, signs, computers, etc.) not to exceed

$100,000.

3) For new, no nstop service by an incumbent or new

entrant carrier to at least two new locations not currently

serviced:

Marketing assistance of $50,000 per flight up to a

maximum of $250,000.

Waiver of one or more of the following fees/rents for a

period of from twel ve (12) to twenty

- four (24) months.Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



### ~ Landing fees for the expanded portion of the service.

~ Ticket counter, Holdroom, gate and apron fees/rents

as a result of the expanded service.

~ Common area charges (baggage claim, concourse,

public areas) associate d with the expanded service.

~ In

- kind contributions such as Terminal advertising,

Airport advertising, local marketing assistance from

local Chambers of Commerce and Convention &

Visitors Bureaus.

~ Assistance with start

- up costs (installation of

counters , communications, signs, computers, etc.) not

to exceed $200,000.

~ Assistance with ground handling on a no cost basis

to SAC.

Documentation: To document the ASDP incentives negotiated with

each incumbent or new entrant carrier, the Staff will

prepare a w ritten outline of the incentives to be provided

with the requirement that the carrier’s official

representative sign a copy of the outline which will be

placed in the SAC files for documentation. The

Commission will be copied on the outline of incentives.



# Air Service Needs

1. Lower Air Fares

2. Increase Capacity

3. 5 th 

### Largest Destination

– Boston

– Currently without non

- stop

service

4. Access to Southwest Airlines Atlanta market & beyond

5. Reduce LeakageSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# High Air Fares:

According to the Bureau of Transportati on Statistics, SAV has

continually ranked in the top five airports with the highest average

airfares. And in 2009, showed the highest percentage (16%) increase

in the nation. Exhibit 8 illustrates the large discrepancy between

SAV’s average fare and the na tional average.

Exhibit 8: Average Airfares (2005

- 2009) SAV vs US Average



# Capacity Losses:

Since 2008 SAV has experienced a dramatic reduction in capacity.

The number of daily flights has either remained constant or was

slightly elevated, but the c arriers have reduced the equipment size.

Exhibit 9: Airport CapacitySavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# Top Market (BOS) Not Served

According to Department of Transportation, Boston ranks as the

number five market out in the Savannah MSA. This is the onl y market

that is not served with a daily non

- stop flight.

Exhibit 10: Top Markets Savannah/Hilton Head InternationalSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# Leakage:

The Savannah/Hilton Head International Airport has experienced a

substantial amount of leakage to t he Jacksonville, FL airport.

Jacksonville is served by Southwest, AirTran, and JetBlue. Without a

low cost carrier in our market, SAV is unable to compete price wise

with JAX (See exhibit 11). Southwest recently began service in 2011

to Charleston . The Sav annah/Hilton Head Airport’s goal is to partner

with a low cost carrier that would aid in keeping the airfares at a

reasonable level.

Exhibit 11: Air Fare

ComparisonsSavannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# Community Demographics , Business

Development, Co mmunity Involvement,

Airport Service Information & Air Service

Arguments (See attachment #2)

Plan Implementation and Funding

In the past three years The Savannah/Hilton Head International

Airport has experienced a major drop in enplanements. This has

bee n caused by: Loss of carrier (AirTran Airways 10/08), reduction

in capacity and leakage due to extremely high air fares. It is

apparent that in order to reverse the trends the airport must secure

a low cost carrier to promote competition among the existing

carriers.

The Savannah/Hilton Head International Airport and the

communities of Savannah and Hilton Head Island have been

pursuing JetBlue Airways and Southwest Airlines. as two low cost

carriers that can be successful in the “low country” area. Both

car riers fit the needs of the area. JetBlue services two of our top five

markets (NYC & BOS), while Southwest Airlines would bring much

needed competition into the Atlanta area & beyond, once the

merger is complete with AirTran Airways. (Arguments are presen ted

in attachment #2).

Our proposal to JetBlue and SW is based on the Air Service

Incentive Program (Exhibit 8) assumes the airline would operate 3

or 4 daily flights from Savannah . Total compensation is listed in

Attachment #2.

The Savannah/Hilton Head International Airport is grateful of its long

term relationship with The Savannah Area Chamber of

Commerce/ The Savannah Convention & Visitors Bureau, and Hilton

Head Island

- Bluffton Chamber of Commerce. Our partners have

pledged their support and help with $30,000 in

- kind advertising

assistance.Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# Funding Overview:

Community Airport DOT

Fund Uses Cash In

Kind Cash In

- Kind Grant Total

Marketing $315,000 $250,000 $250,000

Packages/Rooms $30,000 $30,000

Fee Waivers $1,925,494 $1,925,494

Direct Subsidy $400,000 $400,000

Total $315,000 $30,000 $250,000 $1,925,494 $400,000 $2,605,494



# Airport and In

- Kind Participation :

The community participation will include almost $2 million towards

the program from SAV.

Marketing Program:

SAV will provide the following to accompany the launch of any new

service:

Media Coverage

Public Relations

Public Speaking events

Internet and Social Media

Airport Advertising



# Funding Assurances:

SAV will be the coordinator between the public/private partners for

the DOT grant. SAV will take responsibilit y for the grant funds.



# Measure of Success:

Success will be attained if market is able to reduce the average

airfares, increase capacity, and reduce leakage.Savannah/Hilton Head International Airport

Small Community Air Service Grant Application

– July 2011



# L egal Sponsoring Entity:

Savannah/Hilton Head International Airport

400 Airways Rd

Savan nah, GA 31408

Contact: Patrick S. Graham, Executive Director

912

- 964

- 0514



# Conclusion:

The Savannah/Hilton Head International Airport and the community it

serves should be given priority consideration for the Small

Community Air Service Grant as one of the highest airfare airports in

the nation and by having met the criteria as set forth in the statue as

follows:

A. BTS reports SAV has one of the highest average airfares in

the country.

B. The community and airport will provide over 80% of the cost

C. The reque sted grant would bring immediate benefits to the

traveling communities of two states.

D. The grant will be used immediately upon receipt of the

award.