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# Proposal under the Small Community Air Service Development Grant Program



# Boise, Idaho

Under 49 U.S.C. 41743 et seg

DUNS # 155795230 

### Congressional District # ID
- 02Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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# Table of Contents

I. PROPOSAL OVERVIEW 3

Technical Outline 3


## II. EXECUTIVE SUMMAR Y 5
Statement of Deficiency 5 Proposed Grant Solution Error! Bookmark not defined.


## III. THE BOISE AIR S ERVICE CHALLENGE 6
An Expanding Air Service Need

– Within A Shrinkin g Airline Industry 6
Airline Shares and Fare Trends 8
Boise’s East

- Oriented Gateways Are At Capacity 8
Boise

– Airline Consolidation = Higher Fares & Le ss Capacity 9
Boise Suffers Substantially Higher Fares To The East 11


## III. THE GRANT SOLUT ION 12
Allocation of Grant Program Funds 13
Mechanism: Risk

- Offset 13 Air Service Development Program At Boise 14 Marketing & Community Support 15 Continuing Support

– Post

- Grant 15


## IV. SUMMARY 16Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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# I. Proposal Overview

Boise Airport , in partnership with the Boise Chamber of Commerce herein submit s an application for a grant under the 2013 Small Community Air Service Development Grant Program.
Boise has seen substantial economic and business expansion over the last decade, particularly in the high

- tech sector s. Historically, the air service demand at Boise has been primarily generate d to and from points in the U.S. W est. Today, however, analyses indicate growing demand for access to key commercial centers east of the Mississippi. Because of the lack of capacit y and connecting hub access to key commercial centers on the US East Coast, Boise is at a disadvantage in attracting and expanding its now

- vibrant high

- tech economy. Current Hub Connectivity: Insufficient

. While there is service to connecting hubs at MSP and ORD, the load factors to these points are at the point that traffic is spilled

– or, more typically, totally deterred

– because of lack of seat capacity. There are very limited options to alleviate this at these specific hub airports. At MSP, Delta is not postured for additional growth. At ORD, the congestion and slot constraints puts United in the position of attempting to maximize limited airport resour ces. The Airport and the Community are requesting a grant in the amount of $7 0 0,000, with a local hard

- dollar match in excess of 25 % , to attract and establish access to an additional east

- oriented connecting hub. These have been identified as: American/ JFK , Delta/Atlanta, United/Newark, United/IAD and JetBlue /JFK. Each of these can also open up additional single

- connect markets for Boise on the East Coast. 1


### Technical Outline
A. Official Sponsor
Boise Airport
Point of Contact For This Application:
Ms. Rebecca Hupp Executive Director Boise Airport 3201 Airport Way, Suite 1000 Boise, Idaho, 83705 (208) 424

- 5601
B. Additional Community Members

1 It is recognized that JetBlue does not have a “hub” per se at JFK, but the scope of its service allows connectivity. Furthermore, both United and JetBlue have shown interest

– and success

– in serving points in Montana from New York. This indicates strong potential for much larger BOI to support nonstops.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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- 0120 Page 4 This application has wide local support. The Boise Chamber of Commerce , representing a coalition of business in the Boise Valley, many making cash contributions to fund t he local match, will be the point organization represent ing the Community Members in this application . The City of Boise and the Idaho Department of Tourism will also be part of the community coalition supporting this application.

C . Brief Project Description :

The application requests a grant $70 0,000 , to be accompanied by a local cash match of $ 1 75 ,000, plus in

- kind incentives to provide funding to alleviate a major air service deficiency

– access to the Eastern United States

– via a revenue

- guar antee program. The structure of the program is envisioned as similar to others that SCASDP grants have successfully made possible over the last ten years.


### D. Eligibility

Boise is fully compliant with the eligibility requirements as outlined in the Docket

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# I I

. Executive Summary
Statement of Deficiency Boise has evolved into one of the nation’s top high

- tech regions. One of the emerging deficiencies is the lack of access to the commercial and high

- tech centers in the Eastern United States. Because traditionally the f ocus of business interaction at Boise was with points in the West the airline service patterns developed over the years to meet this geographic need. Today, with the expansion of business scope at BOI, particularly in the high

- technology sectors, there is a growing deficiency in access to and from key commercial centers in the East. 2

As will be noted below, the current hub access to the East is severely restricted by high load factors and inability to expand service at current east

- west connecting hubs served from Boise.
The Airport and the Community have been in contact with a number of carriers that can address this service shortfall. In all cases, however, it has been made clear that risk

- offsets will be necessary to support the decision to add service to Boise. This grant will make that possible.

2 Map s hows service offered in 2013. Nonstops to Honolulu have been discontinued, but the operator has indicate d this may be a seasonal change, and will return in 2014.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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# III . The Boise Air Service Challenge

An Expanding Air Service Need

– Within A Shrinking Airline Industry
Boise, as with most communities, is experien cing changes brought on by shifts in the airline industry. Since 2008, the airport has suffered the loss of literally one fourth of its airline seats

– over half a million

– due to changes in airline strategies, consolidation and mergers.

This loss of air service at Boise is, unfortunately, continuing. More capacity is being cut from schedules in the second half of 2013. The US airline industry is not in a growth mode

. One of these is the challenge of meeting the new air service needs of the Boise business community within an airline industry that isProposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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- offsets to convince an airline that Boise is a better use of resources. 3

With air carriers planning on fewer flights and fewer seats, to attract the air service needed to address this deficiency, Boise will need the support of the grant requested herein. US airlines are acquiring new fleet mixe s . Another factor that must be considered in the Boise air service planning process is that major network carrier s are not expanding the raw number of aircraft in their fleets. In fact, with the retirement of large numbers of 50

- seat jets, the US airline industry will see approximately 2 30 fewer total aircraft in service in 2015, compared with 2012. 4

Pertinent

– and positive

– to this grant application is the entry of new

- generation 90

– 120 seat airliners into major airline fleets. As these come into service starting in the next 12 to 18 months, carriers will have the fleets to economically add more hub

- spokes to B oise, particularly to the East. This grant will facilitate this process.

3 Source: Analysis of airline schedule filings with Innovata, LLC as of 7/10/12. Note that Inn ovata is the only “official” source to which IATA requires airlines to report such data. 4 There were 6,119 turbojet airliners in operation in 2012. This drops to an estimated 5,998 in 2015. The decline is entirely d ue to retirement of 50

- seat jets. Concur rently, more single

- aisle airliners in the 90

– 120 seat category will come into service. These aircraft are well suited to expansion markets from Boise to the East Coast. Source: Boyd Group International Global Airliner Trend & Demand Forecast 2013

– 2022

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### Airline Shares and Fare Trends
The current airline share picture at BO I shows no one dominant carrier. Since 2010, both American and Frontier exited the Boise market. Allegiant en tered the BOI market in 2013, offering day of week leisure flights to Las Vegas, and briefly, to Honolulu.



### B oise’s East

- Oriented Gateways Are At Capacity The recorded O&D traffic at BOI is specifically the result of the service patterns offered

– and not the true demand that exists for additional air service, particularly to the East. If there are no seats, the “demand” cannot manifest. That is exactly the situation Boise now faces.
Today, it is difficult

– and as will be shown below

– disproportionately expensive

- to access Boise from key commercial centers in the Eastern United States. That is because the service to t he key hubsite gateways

– Denver/United, MSP/Delta, SLC/Delta, and ORD/United

– is at seat capacity

– particularly in the third quarter of the year:

When flights are at or above 80% load factors, it means that traffic is being spilled due to inabilit y of consumers to find seats at desired times. Note that the load factors at BOI to and from these key Eastern gateways are all in excess of 80%. This not only results in high fares, but deters consumers from traveling to and from Boise. This cuts the region off from the economic impact of having access to the major commercial centers along the East Coast. Boise consumers do not have the luxury of driving to an alternative larger airport. The nearest larger airport is Salt Lake City, which is over five hours

– almost a full day’sProposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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### drive

– away. This is another reason that this grant is so important to Boise and the economy of Idaho. The air service development staff at BOI have analyzed the potential of simply adding more capacity to these four gateways. The response from the carriers is that there are functional barriers to this. The congestion at these gateways

– both in terms of handling more flights and handling more passengers at peak connecting

- bank periods

– largely precludes additional capacity for the foreseeable future.

Boise

– Airline Consolidation = Higher Fare s & Less Capacity
Since 2007, Boise has suffered a traffic loss of almost 21%

. Average one

- way fares are up by over 40%. In light of the booming economy of Boise, these dynamics are due entirely to constrictions in air service and competition. This has inflicted economic damage to the regional economy. The air service that this grant will make possible will largely alleviate this situation

. 5

 While the average one

- way fare in the US rose 22.3%, Boise fares increased at n early double the national average, by 40.9%.

 O&D passengers have declined by 20.8%

These data clearly show that Boise has absorbed considerable damage from the on

- going consolidation of the airline industry

– far more than the rest of the nation

.

5 Source: Analysis of BTS data, expressed in average OW fares paid, including federal fees and taxes. The national average is computed from one

- way fares from the top 200 US airports.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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### Traffic Declines & Fare Increases Continue
The air service enhancement that this grant will bring to Boise will be instrumental in opening new capacity and new access to the Eastern US. A snapshot of fares and passengers for just the last two years paints a disturbing picture:

Average one

- way fares (here shown net of federal taxes) are up over 23%, while quarterly passenger traffic

– comparing the 4Q of 2012 with that of 2010

– is down almost eight percent. The damage to the Boise economy is three

- fold:

 Because of lack of capacity, overall fares are high (see below) ;

 The penalty is most severe for business travelers, which tend to book close to time of travel ;

 Travel to and from Boise is being artificially dampened and economic impact is lo st. Without seats, and with those available only at high costs, consumers simply do not make the trip.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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### Boise Suffers Substantially Higher Fares To The East

One of the outcomes of the decline in airline capacity at BOI is higher fares. The fact that flights to East

- oriented gateways are essentially full year

- round deters traffic and as a result, business growth in the region. Fares now reflect this situation.
To demonstrate this, fare s between key markets in the West/Northwest to nine representative destinations in the East were compared with those at Boise. Actual fares paid per

- ticket are not valid comparisons, due to differences in sector d istances

. T herefore, the fares charged pe r

- mile (FPM) to these cities is the true apples

- to

- apples metric. Based on this approach, it is clear that the cost of air travel is much higher at BOI than other Points in the region:

The data are illustrative of the air service deficiency that the grant will address. 6

6 Source: BTS data for 2012, analyzed by Aviation DataMinerTM and expre ssed in fares per mile , including federal fees and taxes.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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# III. The Grant Solution

It is clear that the current access to the Eastern US is a major air service deficiency, which is a threat to the continued growth of Boise as a center of commerce and high

- technology.

The solution is recruiting service to an additional gateway to, or at, the Eastern United States. The Airport’s on

- going air service development efforts have identified the following as targets for the grant:

 American Airlines

– JFK International

. American has evinced interest in retu rning to the Boise market. We fully intend to pursue this in regard to initiating flight to the carrier’s hub at JFK. 7

 Delta Air Lines

– Atlanta . Delta is acquiring a wider fleet of single

- aisle jets, and is restructuring its regional part ners. Atlanta would open the entire East Coast to Boise.

 United Airlines

– Newark . This service would open the East Coast to Boise, plus give Idaho its first nonstop service to New York/Tri

- State region. United already operates successful seasonal service to Montana.

 JetBlue

– JFK Internatio nal . It is noted that JetBlue does not focus on generating connecting passengers at its JFK operation. However, the airline has successfully established service to Montana, and Boise would be a very strong addition to their system.

7 The airline also has a strong operation at New York/LGA. This remains an option, but slot restraints are a challenge at that facility.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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– Washington/Dulles . As with the JFK options, this opens Boise to not only the New York/Tri

- State Region, but also to a strong access point to other communities on the East Coast.

 American Airlines (US Airways)

– Charlotte

. At the time of this application, it is believed that the AA/US merger will be finalized in by the end of 2013. Because American has expressed interest in BOI, and since it will inherit the current BOI

- PHX traffic base, CLT is also a very strong target to n ew access to points from New England to Florida.

These are not a wish list. It is noted that:

 They are all options to establish strong viable service from Idaho to the US East.

 All of these carriers have route strategies that fit well with the suggested expansion to BOI.

 All of these carriers have indicated willingness to discuss expansion to the Northwestern United States

. All of these options can and will address the deficiency outlined in this application. As the Department knows, airlines are not in an expansion mode. Therefore, the Airport and Community will endeavor to recruit these carriers on a first

- come, first

- served basis in regard to use of the grant funds. 

### Allocation of Grant Program Funds

In addition, the Airport will provid e fee

- waivers approximating $1 00,000 for the selected carrier and the Boise Metro Chamber of Commerce has pledged $10,000 for marketing , alo ng with an additional $20,000 of in

- kind donations from the Convention and Visitor’s Bureau , for the new service

. Th is represents a total of $38 9 ,000 in local support, including in

- kind and hard dollars.
Mechanism: Risk

- Offset
The risk offset will be engineered similar to others that have been made possible by SCASDP grant awards.

1. Upon final grant approval the Airpor t will apprise the target carriers of the program and begin negotiations as appropriate. Because all four of the identified target carriers meet the criteria to alleviate the Boise deficiency, contact with each will beProposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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- 0120 Page 14 made to establish negotiations. The A irport and Community will determine which offer(s) are most beneficial to Boise.

2. The negotiations will establish the specific revenue

- generation requirements for the carrier, as well as pre

- determined cost factors on a per

- flight basis. Adjustment factors will be included for shifts in fuel price.

3. Specific schedule and reliability metrics will be established for the carrier. For example, it is envisioned that there will be a requirement for 98% flight reliability, ex

weather, and that fare levels will be commensurate with yields charged in markets with similar characteristics

. 4. The revenues will include the local passengers to the hub, as well as an agreed

- upon prorate for the passengers that BOI generates to the airline beyond the hub,

5. The grant period i s envisioned for a two

- year period, starting with the initiation of new service. Each six months, a settlement will be made regarding any shortfall in revenues.
6. The Airport will provide the Department with quarterly reports on the performance of the new, grant

- assisted route. These are general guidelines. The exact agreement will depend on negotiations and the full agreement of the Airport and the Department

. 

### Air Service Development Program At Boise
Boise has an active, on

- going and fully

- staffed air se rvice development department. The Boise team works with incumbent carriers to build on existing service, and has an aggressive program to recruit new service. Most recently, the Airport has been successful in recruiting:

 Las Vegas

– Allegiant Air

 Honolul u

– Allegiant Air

 San Diego

– Alaska Airlines As the route map of current service at Boise clearly illustrates, the access patterns are consistent with the historical business orientation of the region

– i.e., with commercial centers in the western US. The challenge facing Boise, as noted earlier, is opening up new capacity and air service channels to the East. Specific to this application, the Airport has established groundwork with carriers that have route strategies that would benefit from adding ser vice to the East from BOI. Discussions with key airlines are held on a regular basis in this regard. While the traffic and revenue opportunities are recognized, the near universal response from airlines is that risk

- offset is absolutely necessary.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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### Marke ting & Community Support
The wide range of community sectors supporting this grant illuminates the commitment from the businesses in the region.
The new service recruited under this grant will be supported by an already in

- place marketing and regional pr omotion program. The Airport and Community will extend the current aggressive community outreach used to attract and support Allegiant and new Alaska Air flights to San Diego to the service acquired under this grant

. While the actual media and promotion m ix will be tailored to the specific carrier recruited, the program includes pre

- service social events to assure full support from the business community, promotional e

- mail campaigns to companies and consumers based on new destinations accessed, and as app ropriate, media placements. A key part of the marketing outreach will be to key businesses located in cities accessed by the new service. While it is important to have local support, fully 46% of consumers using Boise Airport are visitors. Therefore, the A irport will work with the selected airline in identifying key businesses at out

stations that have a commercial relationship with industries in Boise. 

### Continuing Support

– Post

- Grant
The Air Service Development staff at BOI is prepared to continue to support the new service at the end of the grant period. As shown above with the new service additions, the Airport has the full support of the community in assuring that any new service is supported and utilized.Proposal of Boise Airport 2013 Small Comm unity Air Service Development Grant Program

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# IV. Summary

T his application meets both the spirit and the intent of Congress in enabling the Small Community Air Service Development Grant Program:

 Boise has a material air service deficiency. The lack of adequate access to the East deters traffic and economic invest ment in the region. The current gateway hubs to the East are at capacity

 Fares to the entire Eastern United States are substantially higher than peer cities in the region

 The proposed solution

– made possible by this grant

– is based on an approach that has proven successful in SCASDP programs across the nation over the past decade. It is what airlines want when they take a risk on a new market, and it has worked.

 The airline systems identified in this application all have a track record of assisting com munities such as Boise in building air service with the support of revenue support. Based in this, the Boise Airport and the Boise Chamber respectfully request favorable consideration of this grant application.