# Small Community Air Service Development Program Grant Proposal

For 

# Ithaca Tompkins Regional Airport

DUNS # 135638682 NY Congressional District: #23

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- 01202013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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### 1. TECHNICAL OVERVIE W OF APPLICATION 4

Contact Information 4
Legal Sponsor of Application 4
Community Partner 4



### 2. STATEMENT OF AIR SERVICE DEFICIENCY 5

Grant Solution: Additional Hub Access 6
Primary Grant Targets 7
Service Potentiality

– Very High 8

Grant Applicatio n Differs from FY 2005 SCASDP Award 8

A Risk

- Abatement Grant Will Be Successful 9



### 3. ITH MARKET AREA A ND AIR SERVICE DEFIC IENCY 10

ITH Service Area 10
Air Service Deficiency at ITH 11

Traffic Mix 12

Airline Mix & Market Shares 13
Load Factors: Demonstrate Need For More Capacity 13

Fares

– Higher At ITH 14



### 4. GRANT ADMINISTRAT ION OUTLINE 15

Allocation of Funds 15
Revenue Guarantee Program 152013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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Marketing Support for New Service 16

In

- Kind Incentives 16

Project Term 16

Air Service Development Efforts

– Past And Future 162013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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## 1 . Technical Overview of Application

Contact Information

All c orrespondence related to the grant proposal should be directed to :

Mr. Robert Nicholas, A.A.E. Airport Manager Ithaca Tompkins Regional Airport 72 Brown Rd. Ithaca, NY 14850 T: (607) 257

- 0456 E: bnicholas@tompkins

- co.org

Legal Sponsor of Application

Th e Ithaca Tompkins Regional Airport (ITH) is the official sponsor of this grant application.

Community Partner

Tompkins County Area Development (TCAD) joins the airport in its support of this grant application. TCAD’s mission is as follows: TCAD is dedi cated to building a thriving and sustainable economy that improves the quality of life in Tompkins County by fostering the growth of business and employment.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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## 2 . Statement of Air Service Deficiency

The Ithaca Tompkins Regional Airport (ITH) today experie nces two key deficiencies.

• The first is lack of air service capacity to meet the demand generated in the region. Load factors are high to the point of causing traffic spill.

• The second deficiency is a n outcome of the first: high air fares.

Because of the high load factors and the strong local economy, there are choke points within the current air service at ITH which cause travelers to use alternate airports for their travel, even when ITH is the closest and most convenient for their purposes.

The ec onomic effects of these deficiencies are not inconsequential. The lack of capacity renders access to Ithaca difficult, and as a result makes the region less competitive for new investment.

As just one example, one of the major cornerstones of the regional economy is higher education. Cornell University, Ithaca College, and other educational institutions rely on Ithaca Tompkins Regional as the gateway to handle both domestic and international visitors. It is not well recognized, but air access is a fundamen tal part of educational institutions remaining competitive. They compete with other schools for the best professors, research staff and students from around the globe. 1

Today, this is particularly true for Tompkins County, which is a thriving region of t he southern tier of Upstate NY. The institutions of higher education and business interests rely heavily on the ITH air service, as is evidenced by the high load factors from the incumbent carriers.

As of today, one of the main parts of the world where u niversities compete is in Asia. But for Cornell and other institutions, this access is severely constricted, making it difficult and expensive for travel from that region. Both incumbent

1 Paucity of international access is just one example of the damage being done to the regional economy. To be clear, additional domestic access is equally important.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- 0120 Page 6 airlines that offer connectivity with Asia

– United and Delta

– are e ssentially full, with load factors now consistently at, near, or above 85%. Grant Solution: Additional Hub Access

The objective of this grant application is to provide risk

- abatement funding to support access to another major US hub to increase air servic e access at ITH.

Chicago O’Hare (ORD) and Charlotte/Douglas International (CLT) have been identified as gateways which would fit well into the ITH route network. In addition, because of the very close geographic proximity of Ithaca with New York City, La Guardia and JFK International represent omni

- directional gateways for ITH, and will also satisfy this air service access deficiency.

A visual of the load factors in the ITH

- DTW market is illustrative of the challenge faced by Ithaca.

40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

DL

- DTW 

### Limited Westbound Capacity

Due To High Load Factors

Source : Aviation DataMinerTM analysis of DOT/BTS Form 41 Traffic
When load factors exceed 80%, that represents a situation where during all but short off

- season periods or weekends, flights generally are booked full, and there is “spill” of demand. This spill can take the form of consumers driving to Syracuse, or

– simply not traveling at all. This represents significant economic harm to Ithaca

– a situation which the airport and the community believe can be addressed with a grant

- supported risk

- offset program.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- 0120 Page 7 The current ratio of trip originations (starting at ITH) to in

- bound visitor trips supports this contention. In a market such as ITH

– which is a non

- leisure, business communit y

– the mix of these two ratios should be approximately 50%

- 50%. Half of the traffic being local consumers taking trips, and the other half consumers coming into Ithaca and later returning home.

At Ithaca, however, almost 57% of all traffic is local or iginations. This indicates that much of the visiting traffic is using Syracuse, simply because of lack of capacity at ITH.

Primary Grant Targets

In the evolving state of the airline industry, there are a number of new gateway access points that may or m ay not be options. With mergers, retirement of smaller jet airliners, slot swaps between carriers, and major changes in the strategies of the few network airlines left in existence, the potentiality of service to any one connecting gateway can shift materi ally.

The Airport recognizes this, and as a practical matter, is focused on the following gateways

– any one of which will quickly and cost

- effectively address the lack of access at Ithaca. 2

• Chicago O’Hare (ORD) is a logical and efficient addition to IT H air service to serve the westbound traffic demand . Both United and American have connecting hubs at ORD.

• US Airways (soon to be American) CLT hub will also provide excellent additional air service access, as a growing hub with great connectivity.

• New York Metro: JFK International

– American or Delta, and LaGuardia

– Delta as the key target carriers in that region. 3

2 For small communities such as Ithaca, there is not a wide range of airline brand options, and as a practical matter, some access requires service to a hub that may represent some back

- tracking. The option of AA

- US to CLT represents

access to the entire west/southwest of the US.

3 Adding service to either the Delta/LGA hub or the American hub at JFK will be net additive and represent new markets

from ITH.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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– Very High

The targets carriers of this grant application are not new to the ITH market

. They already have a m arket presence, and

– importantly

– a strong frequent

flyer program base.

• Delta

– which can provide excellent access to its hubs at LGA and JFK

– also has a strong market presence at Ithaca, and that represents low

- risk for the carrier.

• United has found strong success at ITH. For a variety of reasons, after its merger with Continental, and the brand switch at ITH to United, traffic spiked strongly. For United, adding service to O’Hare would also be a logical strategic move.

• Post

- merger, American will be the major

– but not dominant

– airline at ITH, with a 48% market share. Adding a spoke to that carrier’s hub at Chicago/O’Hare represents limited risk for the carrier

– risk that this grant will address. The option of CLT service is essentially the same. T o make either market work, AA begins with a strong, installed base of frequent flyers. It is also likely that when the brand changes from “US Airways” to “American” a demand

- spike as experienced with the UA/CO merger may be experienced.

Grant Application Differs from FY 2005 SCASDP Award

The Ithaca Tompkins Regional Airport was awarded a Small Community Air Service Development Program grant award for $500,000 in 2004. The objectives of this grant were met, and were entirely different from addressing the current air service deficiencies. That earlier grant had the following goals:

• market definition study and demand analysis

• new airport business model analysis

• air service options analysis including scheduled service, charter, etc.

• creation of new marketin g program

• carrier partnering funding

The current SCASDP application differs significantly from the previous grant award. The intent of this grant is solely as a revenue guarantee and marketing of new service, and does not include any studies or analyses.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- Abatement Grant Will Be Successful

As illustrated on the following pages, there is no question that today, Ithaca is underserved. This not only inflicts higher fares to access the region, but also harms the competitiveness of the region in the glo bal economy.

The grant request herein is simple, straight

- forward, and proven highly successful over the last decade. An airline will be offered a clearly

- defined revenue/risk abatement program, based on tightly defined airline cost factors and operationa l performance requirements.

The Airport and the community strongly feel that Ithaca will join the list of airports that have seen air service improvements as a result of the Small Community Air Service Development Program.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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## 3 . ITH Market Area and Air Service Deficiency

ITH Service Area

The Ithaca Tompkins Regional Airport encompasses approximately 220,000 people within a 45 minute drive time to the airport. Due to the fact that Elmira Corning Regional Airport (ELM) and the Greater Binghamton Airport (BGM) are to the south of ITH, and with Syracuse Hancock International Airport (SYR) to the north, there is a finite catchment area.

With SYR service levels being approximately 5x greater than ITH, there is significant passenger traffic leakage due to th e greater levels of air service. A primary outcome of this grant award will be to recapture a portion of the leaking passenger traffic.


# ITH Primary Service Area2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- 0120 Page 11 Air Service Deficienc y at ITH

As previously mentioned, the current hub gateways that are served from Ithaca are now at the capacity point resulting in choke points for passengers traveling to/from the region.

Detroit (DTW), Newark (EWR), and Philadelphia (PHL) all experience high load factors and operational inefficiencies at EWR and PHL ar e also of concern, causing travelers to use other regional airports instead of ITH.

As the map below illustrates, both ORD (588 miles) and CLT (557 miles) are examples of logical connecting hubs that will address this deficiency.

Upon grant approval , the Airport will initiate further discussions with carriers operating connecting hubs at each of these airports. (United and American at Chicago/O’Hare, and American/US Airways at CLT.) The carrier with which the most attractive agreement can be reached will be the selectee.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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Being a globally

- relevant community, Ithaca attracts travelers from all over the globe. This is represented by the fact that it is markets to the west that have the strongest demand

– San Francisco, Los Angeles, Denve r, and Dallas

– Ft. Worth are in the top ten. The service made possible by this grant will facilitate this unique demand pattern. 

## ITH Top 25 Domestic O&D Markets

- CY 2012

Rank Market Psgr PDEW % Originating @ ITH Gross OW Fare % of Pax

1 SFO 15,879 21.7 58.9% $321.68 7.1%
2 LAX 13,295 18.2 57.2% $307.96 6.0%
3 ORD 10,501 14.3 55.7% $179.61 4.7%
4 BOS 8,427 11.5 57.1% $171.65 3.8%
5 DEN 7,983 10.9 58.2% $235.79 3.6%
6 ATL 7,160 9.8 56.1% $197.90 3.2%
7 DFW 6,737 9.2 53.3% $205.66 3.0%
8 MSP 6,449 8.8 53.2% $205.54 2.9%
9 TPA 6,438 8.8 59.0% $187.26 2.9%
10 SEA 6,326 8.6 56.7% $333.21 2.8%
11 FLL 6,057 8.3 56.1% $194.03 2.7%
12 DCA 5,624 7.7 63.8% $225.06 2.5%
13 MCO 5,328 7.3 65.8% $198.75 2.4%
14 DTW 5,107 7.0 42.2% $305.45 2.3%
15 PHX 4,948 6.8 66.4% $267.56 2.2%
16 RDU 4,820 6.6 53.4% $177.82 2.2%
17 SAN 4,493 6.1 60.7% $297.88 2.0%
18 IAH 4,360 6.0 53.4% $249.40 2.0%
19 LAS 3,994 5.5 77.1% $262.92 1.8%
20 RSW 3,448 4.7 68.2% $220.25 1.5%
21 EWR 3,229 4.4 8.4% $132.95 1.5%
22 CLT 3,101 4.2 49.0% $219.94 1.4%
23 IND 2,884 3.9 50.0% $199.08 1.3%
24 PHL 2,655 3.6 47.4% $219.39 1.2%
25 MIA 2,601 3.6 63.5% $263.76 1.2%
Total 151,842 207.4 56.5% $237.97 68.3%

Attention is directed to the trip origination rates, particularly in the top ten O&D markets. All are well over 50%

- which is an indicator that there are barriers to in

- bound traffic generation. 4

4 Local consumers are a mix of leisure and business travel

– typically with some flexibility and with knowledge of the local airport. Visitors, which typically have time

- definite travel needs, are less flexible, and will use other airports

– in this case, Syracuse

– due to high load factors resulting in sea ts not available directly to ITH.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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Ithaca Tompkins Regional Airport is served by three network airline systems.



## Airline Share at ITH CY 201 2

Airline System Psgr % Psgr % Originating @ ITH Avg Gross OW Fare Routing Efficiency

Delta 64,399 29.0% 55.1% $252.30 93.1%
United 50,626 22.8% 54.4% $237.86 84.3% US Airways/AA 107,415 48.3% 59.2% $250.03 84.9%
Total 222,441 100.0% 56.9% $247.94 87.0%

Note that the routing efficiency

– the difference between nonstop miles for all passenger itineraries vs. the miles consumers actually travel, as through connecting hubs

– is below 85% for both United and for US Airways. This indicates that there is substantial backtracking in many O&D markets, making travel more expensive and time

- consuming. Fares are expressed as average one

way, including federal fees and taxes.

Keeping in mind that, a) the top O&D markets at ITH are dominated by points in the Wes t, and b) the only true western connecting hub

– Delta/DTW

– experiences nearly 90% load factors on ITH

- DTW segments, this routing efficiency number indicates that there will be support for the service noted in this application.

Load Factors: Demonstrate Need For More Capacity

Load factors

– shown for the second half of 2012

– are exceptionally high

– particularly to Detroit (Delta) and Newark (United).

Hub Load Factor DTW - Delta 83.7% EWR - United 79.8% PHL - US Airways 74.2%

ITH Average 78.3%2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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– Higher At ITH

In addition to lack of available seat capacity at ITH, the average one wa y gross fares also indicate a deficiency. Over the last four years, ITH fares have been consistently higher than the national average, and were approximately 12% higher in CY 2012. The potential of opening access to another major network hub at ITH will br ing some fare discipline to the market, allowing for recapture of passengers leaking to other regional airports. 

# ITH vs. National Avg. Fare Comparison

2009 2010 2011 2012

ITH Avg. OW Gross Fare $200.77 $210.87 $242.22 $247.94 National Avg. OW Gross Fare $179.85 $196.58 $214.52 $221.54

ITH Fare Premium vs. National Avg. 11.6% 7.3% 12.9% 11.9%2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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## 4. Grant Administration Outline

Allocation of Funds

The primary purpose of the funding is for a revenue guarantee/risk mitigation mechanism to offset risk to the airline for the commencement of new service. In addition, a portion of both the grant and the community match will be used for marketing and advertising the new service. This will help bu ild awareness in the community and ensure maximum ridership once the service begins.

Revenue Guarantee Marketing/ Advertising

Support TOTAL

SCASDP Grant - DOT $550,000 $200,000 $750,000 Community Matching Funds $200,000 $0 $200,000
TOTAL $750,000 $200,000 $950,000

As previously mentioned, the community match will come from Tompkins County Area Development, a local organization focused on economic development within the region.

Revenue Guarantee Program

The revenue guarantee program is intended to offset the risk of operating a new route at ITH, and will largely resemble other successful revenue guarantee terms that the DOT is familiar with from previous SCASDP awards. Specif ically, the plan will include the following, subject to approval from the DOT:

• The cos t

– on a per segment basis

– will be agreed upon, including a reasonable profit hurdle

.

• The new service will generate significant new system revenues (i.e., passengers beyond the hub) and therefore a portion of this new revenue must be accrued to the community’s side of the ledger. Local revenues on the flight will be allocated fully to the segment , while connecting/beyond revenues will be allocated based on an agreed p roration methodology.2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- 0120 Page 16 • Schedule performance will be a critical component in building traffic. Therefore, it is proposed that an agreed upon flight reliability factor (~98%) and on time arrival metric (at the hub) will be included in the agreement.

• It is p roposed that the accounting for costs and revenues be accomplished six months in arrears. The airline will provide advanced booking reports and passenger traffic/revenue performance reports to the airport each month. The actual passengers and actual revenu e accrued to the community will be compared to the agreed

- upon costs, and settlement made.

Marketing Support for New Service

The Community has an aggressive marketing, advertising and regional communications program to be applied to the new service.

Th e focus will be on the total air service advantages in using ITH, with emphasis on the destinational additions of the new service. Pertinent to the region, the educational institutions will assist in identifying key travel generators in other parts of the nation and other parts of the globe, and surgically

- targeted marketing will be applied to these sources of new traffic.

In

- Kind Incentives

ITH is prepared to offer 12 months of landing fee waivers to a carrier that starts one of the new routes proposed in this application. This is an estimated benefit of $102,930.

Project Term

The Ithaca Tompkins Regional Airport respectfully requests that the term of the grant be one year from the start of new service.

Air Service Development Efforts

– Past And Future2013 Small Community Air Servi ce Development Grant Proposal Ithaca Tompkins Regional Airport (ITH)

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- 0120 Page 17 The Airport has had strong success in maintaining existing capacity over the past five years

– a period when many small communities have seen major traffic drops. The Airport was successful in recruiting Northwest (now Delta)

– which has proven a s uccess.

The Airport maintains contact with both incumbent and potential new entrants

on an on

- going basis. The Airport is cognizant, however, that there are very few airlines left in branded operations, and there are fewer still that have strategies that involve small markets such as Ithaca. Therefore, the efforts are to concentrate on incumbents, carefully monitoring changes in strategy and fleets at each.

This is the foundation of this grant application. Going forward, subsequent to the end of the gran t period, the Airport is confident that the approach taken over the past five years will result in growing the new service into the future.