Small Community Air Service Development Program OST – 2013 – 0120

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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-02
Grant Application of Charleston Yeager Airport

Small Community Air Service Development Program OST – 2013-0120

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Table of Contents

TECHNICAL OUTLINE ..................................................................................................3

ELIGIBILITY ...................................................................................................................... 4

II. STATEMENT OF THE DEFICIENCY ..........................................................................5

THE AIRTRAN EXPERIENCE PROVES THE MARKET ....................................................................... 6

III. THE CRW MARKET ................................................................................................7

FARE & TRAFFIC HISTORY .................................................................................................... 8

AIR SERVICE DEVELOPMENT EFFORTS...................................................................................... 9

IV. PROPOSED GRANT SOLUTION.............................................................................11

RECRUITMENT OF NEW LCC CARRIER.....................................................................................11

CRW HAS A TRACK RECORD OF MARKETING SUCCESS................................................................12

PROGRAM STRUCTURE ........................................................................................................12

MARKETING & PROMOTION..................................................................................................13

ALLOCATION OF FUNDING....................................................................................................13

SUMMARY OF GRANT REQUEST ................................................................................14

APPENDIX:................................................................. ERROR! BOOKMARK NOT DEFINED.
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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.
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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.
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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 OWFare 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%

TOTAL TOTAL 87,941 $206.04 27,473 $129.69 -68.8% 58.9%

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.
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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.
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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.
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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 ORF
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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 Significantly
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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.
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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 the

same: some riskoffset will be

needed.
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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.
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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.
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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.
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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 TOTAL




1116 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