1 

## Docket DOT-OST-2010-0124

Proposal under the Small Community Air Service Development Grant Program for

ALBANY, NEW YORK,

CAPITAL DISTRICT AREA

DUNS #145701699 New York Congressional Distri ct #’s 22, 21, 20, 19

Legal Sponsor: Albany County Airport Authority2 Proposal Introduction

The Albany County Airport Authority pr oposes it be allocated funds under the 2010 Small Community Air Service Deve lopment Grant Program (Docket DOTOST-2009-0149) to implement a comprehensiv e air service marketing strategy for the Albany International Airport (ALB). The Albany International Airport is an important transportation resource to the community known as the Albany Capital District Area. Based upon a stronger than average economy and measurable success in economic development a proposal is being made to over set the longterm trend in airport usage resulting in continued reductions in service. The proposal seeks a grant of $300,000 for whic h the Albany County Airport Authority will will contribute an $200, 000 of additional funds.

Need for Air Service to the Support Local Economy

New York's Capital District, also known as the Capital Region or Capital Land, is a region in upstate New York that includes four counties surrounding Albany, the capital of the state: Albany County, Schenectady County, Rensselaer County, and Saratoga County. The Albany International Airport is centered in theAlbany-SchenectadyTroy MetropolitanStatistical Area (ASTMSA) and supports a population of 1.4 million

within 60 mile car drive. The next nearest airports

are 90 minutes to more 2

hours drive time from ALB. The airport’s traffic is approximately 98% Origination and Destination. The major New York City Airports (JFK, LaGuardia,

Newark are a 3 hour drive s outh of the Airport or less from the airport’s Southern trade area. The per capita personal in come in the AST-MSA in 2008 was $40,909 compared to a national average of $39,582. The Capital District has more than 31 employers with more than 1,000 employees, the largest of which is

the State of New York with 54,000 area employees. The Unemployment rate in the AST-MSA was 6.5% in April 2010, com pared to 8.4% for Ne w York State and

9.9% for the nation. Over the past ten years the C apital District has become a

leader in nanotechnol ogy and is the center of a 19-county region branded as “Tech-Valley”. The Capital District is home to Global Foundries (formerly AMD) which is currently constructing one of the largest semiconductor manufacturing facilities in the US, 20 mile s north of the Airport. The State University at Albany College of Nanoscale Science and Engineeri ng has attracted $5.5 billion in public3 and private investment and services as a primary R&D complex for IBM, Global Foundries, Toshiba, Applied material, Novellus Systems, Atotech and others.

Air Service and Airport Usage has Declined at ALB

1,556,796 1,550,402
1,447,553 1,440,385

1,380,483 1,318,819
1,258,000

2004 2005 2006 2007 2008 2009 2010 

### Enplanements

Projected

While the Capital District Economy has performed much better than the State or national economy with a modestly growing population and increas ed presence of high tech business, air service and airport usage has declined at ALB.

Factors Effecting Decline in Enplanements

There are a number of possibl e factors that have lead to the decline in airport usage at ALB. Chief among them are c apacity reductions and fare increases. Capacity reductions have come from both Industry cut back and airline

consolidation. ALB was one of the first Airlines in nation to experience the

consolidation of Northwest Airlines with Delta Airlines. Delta’s post-merger enplanements have declined ap proximately 20 percent from pre-merger levels. ALB has also experienced the fading away of the effect of the appearance of

Southwest Airlines at ALB in 2000. ALB is currently t he only major airport in New York that lacks jetBlue. jetBlue is not only a low cost carrier but also an Airline important to New York and is branded New York’s airline and the stated granted the jetBlue to the right to put the State seal on its aircraft as part of a $30 million incentive to retain jetBlue headquarters in New York.

Currently ALB has contract ed with Sixel Consulting to perform a service leakage study which is underway. The results of the study will provi de additional insight to the loss of airport usage at ALB. However, a US DOT study has revealed that4 ALB has the highest airfares in New York . The following facts were reported in the (Albany) Times Union newspaper on August 2, 2010.

“Of the nation’s largest 100 air ports, Albany airfares ranked 25th, putting it ahead of Syracuse ( 27), JFK (37), LaGuardia (55), Rochester (76), White Plains (7 7), Islip (81), and Buffalo/Niagara (87). Still, Albany was less ex pensive than two other regional airports, Hartford (18) and Newark (5). Anyone who has flown from Albany in recent months likely w on’t be surprised by the rankings. Overall, airfares nationally climb ed 4.7 percent in the first quarter from a year earlier, the DOT found. But Albany saw the fifth largest annual increase, with the average fare rising 14.6 percent to $361.35.”

The facts above are not exhaustive, and an important study underway on airport leakage will add to them, however, the dec line in the enplanements at ALB is a long-term trend that runs opposite of the trends in the population levels and economic activity in the Capital District region.

The long-term decline in enplanements at ALB present s a challenge to induce

incumbent airlines or new airlines to increase service at ALB. We find the general feeling among airlines is there is no need to expand at a declining market

location. We also note that at leas t for now, our average fares are less than Bradley and Newark. With these two facts we believe a marketing campaign may be able to increase enplanements at ALB and allow it to turn the corner on the long-term decline in airport usage before capacity reductions and fare increases get to the point t hat there is little to market to but a new airlines. It would than be poised to encourage incumbent airlines to increase capacity and fare offerings to return the service offerings required by this almost all Origination and Destination airport.

Existing Air Service

The significant decline in enplanements since 2006 threatens the loss of current

air traffic routes and low-fare destinations available from Albany serving both the Albany metropolitan area and many nonmetropolitan co mmunities that should rely upon Albany commercial service. This indicates the need for additional public awareness out reach efforts to attr act the potential passenger within the 1.4 million person 60 minute drive ti me in the airport-trade area.

Albany International Airport currently provides direct service to 25 direct destinations and one-stop service to over 12 destinations. The table on the following page presents the current des tinations, carrier equipment and current fare range.5 Airline Destination R/TRIP 1-Day

2-Weeks Air Canada Toronto 3 Daily Beech 1900 $391-919

Cape Air Massena 3 Daily Cessna $119 Ogdensburg 3 Daily Cessna $119 Watertown 3 Daily Cessna $119

Continental Cleveland 3 Daily RJ $244-872 Newark 4 Daily Q-400/200 RJ $258-408

Delta Detroit 5 Daily RJ $338-554 Atlanta 3 Daily RJ $533-1198 Cincinnati 1 Daily RJ $282-562 Minneapolis 1 Daily RJ $468-1056 JFK 1 Daily RJ $178-338

Southwest Baltimore 6 Daily 737 $142-259 Chicago-Mwy 2 Daily 737 $282-500 Ft. Lauderdale 1 Daily 737 $288-588 Las Vegas 1 Daily 737 $450-784 Orlando 2 Daily 737 $249-580 Tampa 1 Daily 737 $268-594

United Chicago-O'Hare 5 Daily A-320-RJ $268-530 Wash-Dulles 4 Daily RJ $249-1,262

US Airways Boston 2 Daily Saab 340 $204-342 Buffalo 1 Daily Saab 340 $342-520 Charlotte 3 Daily 737 $299-498 NY LaGuardia 4 Daily Dash 8 $179-338 Philadelphia 4 Daily RJ Dash 8 $398-798 Wash-Nat 3 Daily RJ $250-1129

Synopsis of the Community ’s Historical Service

The Airport being operations on June 1, 192 8 in the City of Albany. In 1960, the City of Albany sold the Airport to Albany County to further its development as a regional airport. In 1993, the Albany C ounty Airport Authority was created to oversee the Airport's operati on and further development. In June of 1998, a new terminal officially opened. In February of 1999, the Airport officially opened a new, 1600-car parking garage. An 800-car addition was opened in 2001.

AirTran made a brief but welcome stay at Albany during the 1990s. Albany successfully implemented low fare and com petitive air service in May of 2000

with the arrival of Southwest Airlines. With the arrival of Southwest Airlines, Airport enplanements increased from 1.1 m illion to 1.5 million passengers.6 In 2002, CommutAir established a “micro h ub” at Albany International Airport with three banks of 13 flights to under served New York and New England destinations. Also in 2002, American Airlines, which had served Albany for nearly 80 years discontinued service to New York City.

The rising price of aviation fuel contri buted to CommutAir’s decision to shift its operation to the Midwest in 2005. In 2008 American Eagl e discontinued all service to Albany. This resulted in a re duction in the level of competition on both New York and Chicago flights and ended Al bany’s important connectivity to

American’s national and inter national destinations. In 2008, Cape Air, a regional airline based in Massachusetts, began se rving the upstate community of Massena, Ogdensburg and Watertown from a base established at Albany International Airport under the Ess ential Air Service program.

In 2009 Delta Airlines and No rthwest Airlines merged re sulting in a decrease in the combined carriers enplanements of appr oximately 24 percent from premerger levels. Currently Continental Airlines and United Airlin es account for 20% of the Airports enplanements and are in the process of merging. Continental Airlines

and United Airlines have both declined to sign the Signatory Airport Use and Lease Agreement renewal for January 1, 2011.

Total enplanements for calend ar year 2010 are currently projected to decline to 1.25 million. Air Carrier capacity at Albany has been reduced by 5 percent in the past 12 months and 11 percent in the past 24 months.

Future Requirements

Albany is the Capital of New York State and ha s long benefited from a combination of high levels of gover nment employment and private sector investment. The unemployment rate in the Albany-Schenec tady-Troy MSA was 6.5% in April 2010, compar ed to 8.4% in New York State and 9.9% nationally. Albany has had noteworthy success estab lishing itself as a host to technology companies and has become a leader in n anotechnology and continues to grow in this sector as evidenced by current dev elopment of the largest semi-conductor manufacturing facility in the United Stat es only 20 miles north of the Airport, comprising 1.3 million square feet and $4. 5 billion in investment, which is schedule to being manufacturing in 2012. There are 31 employers with more than 1,000 employees in t he area, the largest being t he State of New York with 54,000 Albany area employees.

The nearest airports to Al bany are Hancock Internati onal, Stewart International and Bradley International all of which ar e 90 minutes to two hours drive time distance from the Albany. The population within a 60 minute and 90 minute drive from the Airport ar e 1.4 million and 2 million respectively.

While the population, employment levels and economic development in Albany International Airport’s prime service area are stable and growing, the reduction in air carriers, seat capacity and enplanement s coupled with the highest air fares in the state inconvenience the community which is now being forced to travel longer distance to airports with more attractive fares and destinations.7 Description of the Community’s Air Service Development

Until 1997, Albany ha d been served primarily by main line carriers. Albany fares were well above average. Albany’s high fa res were the primary reason that Key Bank abandoned its national headquarters in Albany and relocated in Cleveland

in the 1980s.

It was clear then that Albany would requi re a low-fare carrier that could dramatically reduce air fare s if the region was to attr act new businesses and jobs and retain existing businesses. On Oct ober 9, 1996, the Au thority along with community leaders met with Southwest Airl ines executives in an effort to introduce Albany as a possible location for Southwest.

In 1997, the Airport was successful in a ttracting AirTran which offered discount

fares to Orlando. While load factors were in the acceptable 70% range for legacy carriers, AirTran terminated service to Albany on August 1, 1998 citing low sales and underperforming load factors. Since then, the Albany County Airport Authority has been working in concert wit h Senator Charles Schumer to restore

AirTran Service.

In an effort to remain on Southwest’s “radar,” periodic visits were made to Southwest headquarters and Southwest was invited to Albany to view the Airport’s new terminal when it opened in 1998.

In 1999, the Authority retained Siena Co llege Research Institute to conduct a survey of Chief Executive Officers and bus iness leaders within a 150 mile radius of Albany to access the need and potential su pport for Southwest Airlines. The results revealed overwhelming support. T he survey results were forwarded to

Southwest Airlines.

In late 1999, Southwest informed the Aut hority that it woul d begin service to Albany in May of 2000. The Authority, recognizing what has come to be known as the “Southwest Effect,” immediatel y began the constructi on of a new economy parking lot. Crews were completing the blacktop process as Southwest began Albany service on May 7, 2000.

Southwest Airlines also received the benef it of a New York State Department of Transportation grant to pay for two dual over the wing jet bridges to shorten boarding times by 50% and si gnificantly increase passenge r boarding efficiency.

After the arrival of Southwest Airli nes, average fares at Albany have dropped dramatically and enplanements rose to a record 1.6 million before contraction began in 2006. Since 2006 four airlines have consolidat ed and American Eagle terminated service. Airlines, other th an Southwest Airlines, have also substantially reduced the si ze of the equipment oper ating at Albany which has lost service by 5 Jets and 2 Regional Jets in the past 24 months. The Airport has contracted for an Airport Passenger Leakag e study which should be available in

the next six weeks. The Airport intends to use the leakage study to target8 specific air travel audiences in the Airpor t’s trade area that ar e currently inclined to use other more distant airports.

In February 2010 ALB representatives made a strong pitch to jetBlue based upon a consultants study which was met with a response to give them a call back when enplanements start to pickup.

In May of 2010 ALB representat ive went to Delta in Atlanta with a consultant to try to get convince them to lower ALB fa res to Atlanta. Delta indicated they

would add another Delta flight in the summer of 2011 and asked if ALB had any funds for marketing as they do not have ma rketing funds for a small hub airport.

Community Air Service Market ing Needs and Deficiencies

Albany is primarily an origin-destinat ion (O&D) airport with 98% of enplaned passenger originating in Albany . Many of the flights are very early in the morning and require early and timely arrival at th e Airport to allow sufficient time for parking and security check point clearanc e in order to ensure timely boarding and successful travel to clear airport secu rity checks. It is clear early morning departing pastures have little time to resolve any uncertainty where they will park.

ALB is opening new parking access and exit from Exit 5 of Interstate-87 which offers nearly direct airport access. Al bany will also institute a parking loyalty program offering frequent flye r miles for persons using a credit card registered with the program to pay for parking or other services. The airport will use this as a one of its marketing feat ures to increase enplanements on existing service to encourage incumbent airlines to expand service offering s to support the regional community known as the Albany Capital District.

Strategic Plan

The Albany International Airport has histor ically depended on its te nant airlines to advertising their air service, fares and spec ial offers. This practice produced little in tangible advertising of uns ubstantiated benefit to the Airport and community.

The Airport has maintained a limited advertising budget t hat has been used primarily for telephone directories and pr omotion of in-house Airport services such as parking, Airport Business C enter and Foreign Currency Exchange. Excepting phone directories, the Albany International Ai rport’s advertising budget has been limited to annual local newspaper ads targeted at travelers living within a 20 mile range of the Airport.

Albany proposes to significantly expand strategic marketing opportunities and outreach with the proposed th ree-year initiative to establish develop the FlyAlbany “brand”. The development of the FlyAlbany portal would be more than a simple web page but rather a state of the art, intera ctive computer application

that interfaces with our real time air line flight purchase systems maintained by airlines, our own Amano Pa rking system and the Trav elEx currency exchange trading system and provide promotional information about the Airport rebate rewards program as well as other critical travel information. It would not be a9 simple or conventional web page, but w ould set a new paradigm for interactive real-time intelligent travel service.

While many airports use the name of their city, as we have proposed, to market their airport and have a similarly named we bsite such as flydenver, flysyracuse, etc. FlyAlbany would be unique and set a new standard in establishing a robust and user-friendly system to actually use the internet domain name FlyAlbany.com to transact air transportation business transactions. We believe that, in the current air transportation market this is essential as many travelers start and finish their air transporta tion purchases using a website like

Priceline.com or Travelocit y.com to first pick an air port, than purchase a flight from a commercial airline and often buy in advance a parking reservation from a

similar site.

Albany proposes to es tablish use of the FlyAlbany.com domain for all communities served by the Albany Inte rnational Airport. We would be encouraging these service areas to begin and complete their air travel search and purchase, plan their trip to the air port and confirm their travel and parking arrangements on the FlyAlbany.com portal.

Target Audience The target audience for the Airport’s FlyAlbany initiative will be business and

leisure travelers that live or work in New York counties located within one hour drive time from the Airport using t he I-87/I-90 Corridors from the Airport.

Web Site Design The Albany County Airport Authority will s eek competitive bids to design and host

a FlyAlbany web site. This web site will prov ide several interactive components that will enable travelers to search Albany fares and fare specials, book flights, plan parking arrangements, rental car reservations, make on-line foreign currency exchange transactions and receive real-time Airport updates on safety or security travel alerts, highway trav el conditions, weather, flight delays and

cancellations.

Advertising and Promotion

Radio FlyAlbany radio advertising will be designed to cover the entire primary trade area of the Albany Inte rnational Airport.

Television FlyAlbany television advertising will include the Albany New York television

market.

Newspaper FlyAlbany newspaper advertising will plac ed on the following New York newspaper markets: Plattsburgh, Glens Falls, Saratoga Spri ngs, Albany, Utica, Amsterdam and Kingston.10 Billboards A comprehensive billboard ca mpaign will be devel oped to include both Interstate Highway and regional highway locations with in one hour of the Airport.

Promotiona l The Airport’s Office of Public Affairs will contact civic organizations and governmental agencies within the targeted area and offe r to provide on-site presentations that outline the Airport’s web-based services and the advantages of using Albany International Airport. The program will include a 30-minute PowerPoint presentation followed by a question and answer period.

Timetable We will begin offering the enhanced parking access from I-87 in October of 2010 along with the Airport fr equent flyer rebate program.

While grant announcements were circulat ing and being evaluated, a vendor would begin on internet portal develop ment and appropriate advertisers and rates would be finalized in the target co mmunities surrounding the airport. The initial phase will include internet por tal development to be completed within 120 days.

The second phase of the FlyAlbany program will begin 121 days following the announcement of the grant appr oval and will include:

Targeted newspaper, radio an d television advertising that will alert business and

leisure travelers to the new FlyAlbany Internet portal and the advantages of choosing Albany International Airport to iden tify the many direct destinations and attractive fares to choose from, its convenient parking and online parking information, its online currency purc hase and Travel cash cards through TravelEx, and its status as the only airpor t in the Northeast featuring dual over the wing jet bridges.

We have already procured the FlyAlbany.c om domain name, redi rected it to our current web site and are ready to devel op and roll it out. Like wise we have developed and are ready to roll out th e online currency purchasing system developed by TravelEx at no cost to the airport.

Accountability The Albany County Airport Authority Chief Financial Officer will monitor and evaluate the performance of the strategic plan and certify that the grant funding is spent in accordance with grant requi rements and Airport financial guidelines and facilitate the Albany team’s efforts to make adjustments to the program to achieve initial stated goals of sust aining and expanding Albany direct destinations along with capture of outlyi ng regional markets unaware of Albany’s air travel and direct destination opportunities.

The Airport Chief Financial Officer will r eport the performance of the FlyAlbany initiative to ensure it is meeting or exceeding goals on a monthly basis by expanding the Airports already peer l eading robust financial and statistical reporting process which include annual aw ards from the National Government11 Finance Officer’s Associat ion for Excellence in financial reporting and achievement in budgeting. The Airport Authority Board is highly qualified and very involved in program dev elopment and will continue to actively participate in program oversight to ensure project success.

Local media is in regular attendance and is sure to include progress reports on the progress of this project.

Project Continuity

Project continuity will be maintained uti lizing Airport funds wh ich are expected to increase as a result of this program. We also believe the initial promotion of the FlyAlbany domain will create ongoing awareness. Albany st aff has explored and

evaluated the effectiveness of marketing programs at other airports that let the program lapse when funding ran out and are committed to avoiding this short

lived burst and are committed to conti nue operating and fundi ng the on-going

program.



### Project Budget by Major Component

FLY ALBANY BUDGET

Multi-media advertising

Radio, Television, Bill Board, Newspaper 375,000 $

Web Site Portal Development 55,000

Administration 40,000

Airport Patron Rebate Program 30,000

Total 500,000

Authority Share 200,000

Grant Share 300,000 $