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## Grant Application Under The 

# Small Community Air Service Development Grant Program Docket DOT-OST-2013-0120



# Charleston Yeager Airport
Charleston, West Virginia

DUNS # 156174617 Congressional District # WV-02Grant Application of Charleston Yeager Airport

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## Table of Contents

TECHNICAL OUTLINE ..................................................................................................3 E LIGIBILITY ...................................................................................................................... 4 II. STATEMENT OF THE DEFICIENCY ..........................................................................5 THE AIR TRAN EXPERIENCE P ROVES THE M ARKET ....................................................................... 6 III. THE CRW MARKET ................................................................................................7 FARE & TRAFFIC H ISTORY .................................................................................................... 8 AIR S ERVICE D EVELOPMENT E FFORTS ...................................................................................... 9 IV. PROPOSED GRANT SOLUTION.............................................................................11 RECRUITMENT OF N EW LCC CARRIER .....................................................................................11 CRW H AS A TRACK RECORD OF M ARKETING S UCCESS ................................................................12 P ROGRAM STRUCTURE ........................................................................................................12 M ARKETING & P ROMOTION ..................................................................................................13 ALLOCATION OF F UNDING ....................................................................................................13 SUMMARY OF GRANT REQUEST ................................................................................14 APPENDIX:................................................................. ERROR! BOOKMARK NOT DEFINED.Small Community Air Service Development Program OST – 2013 – 0120 3



## Technical Outline A. Charleston Yeager Airport Point of Contact For This Application:
Mr. Rick Atkinson Director Charleston Yeager Airport 100 Airport Road - Suite 175 Charleston, WV 25311 Phone: 304-344-8033 Fax: 304-344-8034 B. Additional Community Members The Charleston Yeager Community Consortium is the community sponsor of this application C. Project Sponsor The Central West Virginia Regional Airport Authority will serve as the official sponsor of this application and will be responsible for grant administration. D. Project Description : Airline consolidation has materially and negatively affected Charleston Yeager Airport. Specific to this application is the decision by Southwest Airlines to delete all AirTran service at CRW, as part of the former carrier’s plans to integrate AirTran into its system as part of a merger. This deletion of highly-successful and much-needed nonstop service to Orlando has had an enormously damaging effect on traffic between Charleston Yeager and major points in Florida, where fares at many of the state’s leisure points can be affected by changes at one major destination. This has been the case at CRW. In wake of the Southwest/AirTran merger decision to delete CRW-MCO flights, the average one-way fare, including federal fees and taxes to all major Florida destinations have skyrocketed by almost 60%. This has in turn caused passenger demand to Florida to collapse by almost 70% - in one year

. This application is requesting a grant in the amount of $700,000 with a local hard-dollar match of $170,000 (24%) to apply to a comprehensive The grant will address a major air service deficiency resulting from the merger of AirTran and Southwest.Grant Application of Charleston Yeager Airport

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and aggressive program to recruit and support new, low-fare service to Florida. The AirTran experience clearly shows the need and the viability of this service. Therefore, a substantial part of this program will be focused on aggressive advertising and marketing to ensure not only success, but the potential of additional service to leisure destinations. The Airport and community believe that the successful – and profitable – experience of AirTran will result in the community’s recruitment efforts in bringing back nonstop service to replace this lost service. The marketing dollars will be critical in assuring the new service rapidly builds ridership. 

### Eligibility Charleston Yeager Airport is fully compliant with the eligibility requirements as outlined in the Docket.Grant Application of Charleston Yeager Airport

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## II. Statement of The Deficiency On June 1, 2012, AirTran Airways ceased service at Charleston Yeager Airport. The airline had provided the region with nonstop low-fare service to Orlando International Airport since June of 2009. The reason was not lack of passengers, nor – according to the airline itself – lack of profitability. The decision was made by Southwest Airlines as a result of that carrier’s acquisition of AirTran. For various reasons, particularly the much higher costs at Southwest, the carrier unilaterally determined that CRW would not be a part of its post-merger route system. The results of the loss of this low-fare service – and the pricing discipline it maintained in the CRW market - were rapid and damaging to Charleston Yeager and the communities it serves. The grant requested is structured to recruit another LCC to restore the traffic and fare viability that were lost with the merger-induced removal of AirTran from the CRW market. Plummeting Traffic & Fares Up 23% . Between the fourth quarter of 2011, when AirTran was still in the market, and fourth quarter of 2012, a full quarter after the departure of the carrier, the fundamentals of CRW air service deteriorated. Traffic dropped severely and average fares skyrocketed in the absence of this low-fare airline. 1

Florida Fares: Up 59%. Fares to major Florida destinations from CRW took enormous jumps in the wake of this merger-induced elimination of low fare service at CRW:

1 Source: 4Q BTS Data computed as one-way fares including federal fees and taxes. 4Q 2012 4Q 2011 PCT Chg Passengers 109,143 134,612 -18.9% AVG OW Fare $271.72 $221.51 22.7%

Rank Market Pax Average OW Fare Rank Market Pax Average OW Fare Psgrs Fares 3 MCO 5,390 $184.90 1 MCO 12,873 $122.08 -58.1% 51.5% 8 FLL 2,970 $201.50 2 FLL 9,054 $90.55 -67.2% 122.5% 12 TPA 2,400 $221.72 12 TPA 2,887 $207.54 -16.9% 6.8% 29 JAX 1,020 $262.99 23 JAX 1,472 $218.06 -30.7% 20.6% 34 RSW 920 $247.03 31 RSW 1,187 $222.85 -22.5% 10.9%

87,941 $206.04 27,473 $129.69 -68.8% 58.9% TOTAL TOTAL CRW Top Florida Markets YEAR 2012 Quarter 4 YEAR 2011 Quarter 4 Percent Change The decision to delete AirTran from CRW was entirely due to airline-centric issues, and not the viability of the market.Grant Application of Charleston Yeager Airport

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The loss of AirTran caused fares to these major Florida destinations – which concurrently were among the top O&D destinations from CRW – to spike by almost 60% in a single year, with traffic plummeting by nearly 70%. The Department is aware that the presence of a low-fare carrier at an airport such as CRW has a wider effect on fares than just in the specific markets the LCC operates. This was the case with AirTran. 

### The AirTran Experience Proves The Market Without question, the three years of AirTran service proved the viability of the CRW market for low-fare Florida service. In the last full year of service at Charleston, the AirTran flights averaged over 80% load factors and had yield performance that exceeded many other AirTran markets from Orlando – including some very large destinations. 2

These data are provided to show that with the grant requested herein, CRW can offer a target carrier a market that is proven and strong. It is not a supposition. It is an air service deficiency directly caused by the federally-approved merger between Southwest and AirTran. For this reason, the Airport would respectfully request that the DOT to give this application favorable review to offset the damage done by this consolidation. These data clearly show that Charleston Yeager fits the intent of the Small Community Air Service Development Program.

2 Source: Full year ending 2Q 2012, with BTS data expressed in average one way fares and related fares per mile. M arket A vg OW F are T icket Yield
CRW $104.11 12.73¢ MCI $165.68 12.42¢ ABE $130.28 12.31¢ IAD $143.66 12.15¢ GRR $148.87 11.95¢ DTW $134.20 11.89¢ BKG $134.91 11.71¢ DFW $140.27 11.57¢ BOS $153.84 11.41¢ HPN $130.07 11.20¢ LGA $136.28 10.85¢ DSM $175.69 10.47¢ DEN $192.82 9.62¢ LAS $213.19 7.99¢ LAX $226.16 7.74¢ MDW $143.19 12.33¢ FL In addition to consistent load factors over 80%, the AirTran service achieved yields higher than many other of the carrier’s markets. This points to a vacant opportunity for a new carrier at CRW.Grant Application of Charleston Yeager Airport

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## III. The CRW Market Charleston Yeager Airport is currently served by four network airline systems. These are American, Delta, United, and US Airways. Until June of 2012, AirTran provided low-fare service to Florida, which as noted above, was successful and provided a demonstrable measure of fare discipline in the CRW marketplace. Spirit Airlines offers day-of-week seasonal service to Myrtle Beach, aimed specifically at the golf/leisure market.

In 2013, CRW also suffered the loss of American Airlines service to New York/LGA. This market was successful, but changes in fleet mix and fleet applications at the American Eagle system resulted in shifts in the AA route system and slot allocations at LGA resulted in the cessation of CRW access to the New York metro area.Grant Application of Charleston Yeager Airport

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### Fare & Traffic History Fares at Charleston, particularly since the removal of AirTran, tend to be higher than other airports in the region. This is demonstrated by average one-way fares, inclusive of federal fees and taxes, reported for the fourth quarter of 2012. 3

Overall, consumers are now paying more to fly at CRW than at other cities, some of which can be accessed by road from the Charleston catchment area.

3 Source: BTS data expressed as one-way fares for 4Q 2012.

$279.04

$217.54 $254.65

$216.01 $264.70

$238.15 $233.04

$150.00 $170.00 $190.00 $210.00 $230.00 $250.00 $270.00 $290.00

CRW CMH LEX PIT LYH RIC ORFGrant Application of Charleston Yeager Airport

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The loss of AirTran is clearly indicated in both fares and traffic. The chart indicates annual changes in passengers at CRW. Note that the loss of AirTran has resulted in a situation where 2013 passengers will be at the lowest point in over a decade.

Note that subsequent to the entry of AirTran in 2009, competition grew at CRW, benefiting all incumbent carriers. In mid-2012, the results of Southwest’s decision to cut CRW from the AirTran route map resulted in a decline in passengers at the airport.The funding made possible by this grant will result in successful reintroduction of a low-fare carrier and reverse this situation. 4
The Effects Can Be Reversed While the long term traffic view is clear from the chart above, a more granular, quarter-by-quarter perspective brings home the value of this grant to West Virginia consumers. 

### Air Service Development Efforts Charleston Yeager has one of the most aggressive air service recruitment programs in the nation.

4 The 2013 number is based on the experience from the first four months of passenger traffic.

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Pax 251,942 242,485 291,889 318,101 283,912 272,116 239,466 233,058 262,984 284,842 270,193 230,019 210,000 230,000 250,000 270,000 290,000 310,000 330,000 The Loss of AirTran Has Caused Traffic To Drop SignificantlyGrant Application of Charleston Yeager Airport

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The Airport staff maintain on-going contact and liaison with the planning departments of all incumbent carriers and potential new entrants.

 The Airport’s marketing efforts resulted in American implementing service to LaGuardia

 The Airport’s innovative ground-handling package was the lynchpin in the decision of AirTran to enter the CRW market

 Spirit service to Myrtle Beach was the outcome of extensive negotiations to implement this leisure service Indicative of the scope of the efforts of CRW is the marketing and advertising program outlined herein to support the new airline that will enter the market as a result of this grant.Grant Application of Charleston Yeager Airport

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## IV. Proposed Grant Solution Charleston Yeager and the community understand that with the replacement of low-fare service to Florida – preferably Orlando – both the lost traffic and the fare discipline provided by AirTran will return to the market. The Airport is in contact with four operators regarding restoration of this service. The carriers have made clear that both some minimum revenue guarantee (MRG) program and an aggressive marketing program on the part of the CRW community will be required to support new service. In this application, the Community is seeking a grant of $700,000, to be matched with hard local dollars of $170,000 to provide the target carrier(s) with a reasonable revenue support program, and a very aggressive advertising and marketing program. Total dollar funding of the program will be $870,000. Because the CRW-Florida market is proven, the revenue guarantee will be one to provide the airline with a reasonable expectation of risk-offset, while substantial advertising and marketing support will be provided to assure rapid traffic build, and building the potential market for the additional Florida service CRW can support. 

### Recruitment of New LCC Carrier The Airport has discussed the post-AirTran opportunity with a number of airlines, and with the grant, is confident a carrier will enter the market and repair the economic damage inflicted with the loss of AirTran. The plan has two components. The first is a risk-offset providing the airline with a reasonable safety net in regard to early months of service, in the form of a minimum revenue guarantee (MRG). In light of the strong performance of AirTran, this portion of the funding is felt to be low-risk for both the Community and for the Department. Nevertheless, of the total funds, $495,000 will be allocated to this portion of the program. Because the Airport and Community feel that this new service is critically important to the CRW region, a comprehensive marketing and advertising program has been developed, with an estimated cost of $375,000. The program will be aimed at building ridership on the new service to the point that the target airline will eventually add more flights. This aggressive approach also will tend to lower the risk of the carrier needed to access the MRG. CRW has discussed this opportunity with a number of carriers. While interested, the response is thesame: some riskoffset will be needed.Grant Application of Charleston Yeager Airport

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### CRW Has A Track Record of Marketing Success The minimum revenue guarantee program outlined in this application is of a nature that has proven many times successful over the decade-long history of the Small Community Air Service Development Program. Indeed, it is similar to one used in 2002 by CRW to facilitate successful – and continuing – service to the United Airlines hub at Houston Intercontinental. The Airport and Community have in place the important post-inaugural marketing and advertising programs to assure continued success of the new service. Specifically, the targeted e-mail and local media insertions are planned as a routing part of the Airport’s on-going marketing program. The grant will allow an additional enhanced targeted program for the six months after service initiation. These efforts will include direct targeted marketing to consumers who use the new service, as well and a focused media-relations plan to keep the new service in the public eye. 

### Program Structure The Airport is in discussions with carriers regarding the opportunity represented by the loss of AirTran. Minimum Revenue Guarantee The minimum revenue guarantee will be constructed based on known and demonstrated cost and market performance data from the AirTran service. Generally, the program would be as follows:

1. Carrier Negotiations. CRW staff will contact each target carrier and request a term sheet regarding establishing service to a major Florida destination. The preferred route would be Orlando (either MCO of SFB) but other airports will be considered depending on the compelling nature of the proposal.
2. Determination - Minimum Revenue Guarantee . Because the Airport has hard data regarding fares, aircraft costs, traffic seasonality, and demand, this part of the program will be relatively simple to develop. The Airport feels that the strong performance by AirTran will minimize the risk to grant funds. Since the service is expected to be almost entirely point-to-point (as was AirTran) the revenue determination will be straight CRW has successfully used grant funds to incubate service to United’s hub at Houston. The Airport has enormous experience in making new service work.Grant Application of Charleston Yeager Airport

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forward, without the complexity of negotiation prorates of revenues generated by through or connecting passengers. 3. Performance Criteria . The target carrier will agree to specific schedule reliability standards. These will include completion factors (estimated at 97% ex-weather), and on-time performance (at least 85% on-time within 15 minutes of published schedule) and other customer service standards.
4. Timeframe. The Airport is proposing the grant be in effect for two years, starting from the date of service initation. Review of revenue performance v negotiated costs will be accomplished every six months and settlement made at that time for any shortfalls.
5. Reporting. Charleston Yeager will be responsible for recordkeeping and providing required reports and updates to the Department. These are general guidelines. The exact agreement will depend on negotiations and the full agreement of the Airport and the Department 

### Marketing & Promotion The Airport has developed a comprehensive and detailed program for implementation subsequent to grant award. A complete schedule is attached in the Appendix. 

### Allocation of Funding It is proposed that both components of the program – the MRG and the Marketing – be allocated on an 80/20 ratio as follows:

CRW, State of WV, & Community US DOT Total Marketing $73,276 $301,724 $375,000 MRG $96,724 $398,276 $495,000 Total $170,000 $700,000 $870,000 The advertising and marketing plan shown in the Appendix provide insight regarding CRW’s exceptional expertise in supporting new and incumbent air service.Grant Application of Charleston Yeager Airport

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## Summary of Grant Request Charleston Yeager represents a market for which the Small Community Air Service Development Program was designed. It now has fares that have increased disproportionately and are higher than peer airports. It has a very clear and material deficiency in air service. The deficiency is one that can be remedied easily. The Airport has a track record of successful air service development. Charleston Yeager and the Community would respectfully ask the Department to carefully review this document, and allow CRW to demonstrate how the SCASD program can benefit small communities.Small Community Air Service Development Program OST – 2013 – 0120 15 

## Appendix
Marketing and Advertising Support Program

Promotional Mix start - 2 start - 1 start start + 1 start + 2 start + 3 start + 4 start + 5 start + 6 start + 7 start + 8 start + 9 Online Cost Per Event Event Total Facebook Advertisement $1,500 1 3 2 2 2 2 2 2 2 2 2 2 36,000 Online advertisement - other $1,000 3 4 4 3 2 1 2 1 2 1 1 1 25,000 Facebook Promoted Post $700 3 4 4 4 4 4 4 4 4 4 4 4 32,900 Newspaper Combo Price Charleston Newspaper $3,000 2 4 4 4 4 3 2 2 3 2 2 2 102,000 Huntington Newspaper $1,235 2 4 4 4 4 3 2 2 3 2 2 2 41,990 Beckley Newspaper $900 2 4 4 2 2 2 2 2 3 2 2 2 26,100 Parkersburg Newspaper $800 2 4 4 2 2 2 2 2 3 2 2 2 23,200 Pikeville Newspaper $600 2 3 3 2 2 1 1 1 2 1 1 11,400 Promotional Event Ticket Giveaway $200 4 4 4 4 4 4,000 Kick-off event/reception $20,000 1 20,000 Gate event $5,000 1 5,000 Misc $1,000 1 1 2,000 Other Promotional Events $5,000 1 1 1 1 20,000 Radio Regional Campaign 25,000 374,590 Numbers represent number of events per month

CAMPAIGN TOTAL1116 Smith Street, Charleston, WV 25301 304.340.4253 · 800.792.4326 · FAX 304.340.4275 www.CharlestonAreaAlliance.org 

### July 17, 2013
Richard A. Atkinson III Central West Virginia Regional Airport Authority 100 Airport Road, Suite 175 Charleston, WV 25311 Dear Rick, The Charleston Area Alliance, a multifaceted economic, business and community development organization as well as the largest regional Chamber of Commerce in West Virginia, is an engaged supporter of the application of Yeager Airport for a Small Community Air Service Development grant. Comprehensive air service is a major factor that companies analyze when considering the Charleston Metropolitan Statistical Area (MSA) as a possible location for their business. Being directly connected to valuable areas of our country assists us greatly in our business recruitment efforts. The Alliance is pleased to partner with Yeager Airport on this grant application and grow our Florida markets. Best regards,

Matthew G. Ballard President/CEO