## Sponsor: Toledo

- Lucas County Port Au t hority

– Toledo Express Airport

Dun & Brad street DUNS Number : 051625127

Tax Identification Number: 34

- 6406986

Congres sional District Code: OH

- 09 

# Toledo Express Airport

Toledo, Ohio

Proposal Under the Small Community Air Service Development Program

Docket DOT

- OST

- 2011

- 0119Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

- 0119

2 

## TABLE OF CONTENTS

INTRODUCTORY LETTER

................................ ................................ ................................ .......................... 4

SUMMARY INFORMATION (SOLICITATION APPENDIX C)

................................ ................................ ..... 5

A. Applicant Information

................................ ................................ ................................ ................................ .......... 5

B. P ublic/Private Partnership

................................ ................................ ................................ ................................ .... 5

C. Project Proposal

................................ ................................ ................................ ................................ .................... 6

D. Existing Landing Aids at Airport

................................ ................................ ................................ .......................... 6

E. Project Cost

................................ ................................ ................................ ................................ ............................. 6

F. In

- Kind Con tributions**

................................ ................................ ................................ ................................ .......... 7

G. Is Application Subject to Review by State Under Executive Order 12372 Process?

................................ 7

H. Is Applicant Delinquent on any Federal Debt?

................................ ................................ ............................... 7



### EXECUTIVE SUMMARY

................................ ................................ ................................ ........................... 8

AIR SERVICE OVERVIEW

................................ ................................ ................................ ........................ 9

Catchment Area

................................ ................................ ................................ ................................ ........................ 9

Existing Air Service

................................ ................................ ................................ ................................ .................... 10

Alternative Airports / Leakage Study

................................ ................................ ................................ ................... 11

Historical Air Service

................................ ................................ ................................ ................................ ................. 12

Air Service Development Efforts

................................ ................................ ................................ ............................ 14



### AIR SERVICE NEEDS AND DEFICIENCIES

................................ ................................ ............................. 16

Comparable Communities

................................ ................................ ................................ ................................ .... 16

Retention Analysis Details

................................ ................................ ................................ ................................ ....... 17Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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3 

## TABLE OF CONTENTS (continued)

STRATEGIC PLAN

................................ ................................ ................................ ................................ .. 19

Proposed New Route

................................ ................................ ................................ ................................ .............. 19

Goals

................................ ................................ ................................ ................................ ................................ .......... 19

Target Airline Support

................................ ................................ ................................ ................................ .............. 20

Toledo

- Denver Traffic and Fare History

................................ ................................ ................................ ................ 21

Connecting Traffic and Revenue on Frontier via Denver

................................ ................................ ................ 22

Connecting Traffic and Revenue on United via Denver

................................ ................................ .................. 24

Connecting Traffic and Revenue on Southwest via Denver

................................ ................................ ........... 26

Grant Amendments / Alternative Strategies

................................ ................................ ................................ ...... 28

Path to Sustainability

................................ ................................ ................................ ................................ ............... 28

Previous Grant Award and Return

................................ ................................ ................................ ........................ 29



### PROJECT IMPLEMENTATION, MONITORING, AND FUNDING

................................ ............................. 31

Public / Private Partnerships

................................ ................................ ................................ ................................ ... 31

Project Funding

................................ ................................ ................................ ................................ ......................... 32

Implementation Timeline

................................ ................................ ................................ ................................ ........ 33

Success Metrics

................................ ................................ ................................ ................................ ........................ 34

Legal Sponsor

................................ ................................ ................................ ................................ ............................ 35

Financial Controls

................................ ................................ ................................ ................................ ..................... 35

Use of Loc al and Department Funds

................................ ................................ ................................ ................... 36

Return on Investment

................................ ................................ ................................ ................................ .............. 36



### APPENDIX: LETTERS OF SUPPORT

................................ ................................ ................................ ........ 37Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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4 

### INTRODUCTORY LETTERToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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5 

### SUMMARY INFORMATION (SOLICITATION APPENDIX C )

Small Community Air Service Development Program

Docket DOT

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- 2011

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### A. Applicant Information

Not a Consortium Community now receives EAS subsidy

Interstate Consortium Intrastate Consortium

Community previously received a Small Community Grant

If previous recipient, date of Grant:

__ August 31, 2006________

expiration date of G rant:

__ August 29, 2010________



### B. Public/Private Partnership

Public:

1. The Toledo

- Lucas County Port Au thority

2. Lucas County Improvement Corporation

3. The City of Toledo

4. Lucas County

5. The University of Toledo

6. Northwestern Ohio Regional Economic Development Association

Private:

1. Regional Growth Partnership

2. The Toledo Chamber of Commerce

3. Quick Flight AviationToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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6 

### C. Project Proposal

Marketing Upgrade Aircraft New Route

Travel Bank Service Restoration Subsidy

Surface Transportation Regional Service Revenue Guarantee

Launch New Carrier Start

- Up Cost Offset First Service

Study Secure Additional Service Other (Specify)



### D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instru ment Approach

Localizer Other:



### E. Project Cost

Line Description Sub Total Total

Amount

1 Federal amount requested $ 750,000

2 State cash financial contribution $

-

Local cash financial contribution

3a Airport cash funds $ 2 50,000

3b Non

- airport cash funds $ 250,000

3 Total local cash funds (3a+3b) $ 5 0 0,000

4 TOTAL CASH FUNDING (1+2+3) $ 1, 2 50 ,000

In

- Kind contribution

5a Airport In

- Kind contribution** $ 6 42 ,025

5b Other In

- Kind contribution** $ 235,500

5 TOTAL IN

- KIND CONTRIBUTION
(5a+5b) $ 8 77

, 5 25

6 TOTAL PROJECT COST (4+6) $ 2

, 1 27

, 5 25Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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7 

### F. In

- Kind Contributions **

For funds in lines 5 a (airport in

- kind contribution) and 5 b (other in

- kind contribution), please describe the

source(s) of fund(s) for each.

In

- Kind Contributions from Toledo

- Lucas County Port Authority : $ 6 4 2 ,025

Waived Airport Fees $ 542 ,0 25

Value of Marketing/Sales Professional employee provided to air

carrier $ 100,000

In

- Kind Contributions community partners : $ 235 ,500

Media partners in

- kind advertising support $ 235 ,500



### G. Is Application Subject to Review by State Under Executive Order 12372 Process?

This application was made available to the State on ______.

Program is subject to review, but has not been selected by the State.

Program is not covered.



### H. Is Applicant Delinquent on any Federal Debt?

NoToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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8 

### EXECUTIVE SUMMARY

Due to a series of events, Toledo Express Airport has been left with access to only one hub airport via

service on one network airline. These events, driven by the dramatic changes in the airline industry

during the past decade, have forced most Toledo

- area passengers to use other airports, with Toledo

Express Airport retaining only 7.6% of passengers in its catchment area in 2009 . Despite this background,

the airport has be en able to successfully introduce and maintain focused less

- than

- daily leisure service.

With the help of the Department and community partners, we anticipate increasing airline network

access through initiatives such as this proposal to bring new nonstop service to the region and create

an economic impact of up to $2.7 million for northwest Ohio.

The Toledo

- Lucas County Port Authority is

requesting a Small Community Air Service

Development Grant in the amount of $ 750,000

as part of a $ 2.1 million effort t o increase

retention of Northwest Ohio passengers at

Toledo Express Airport (TOL) through the

introduction of new air service

. The Department

of Transportation’s role would be to support a $1

million m inimum r evenue g uarantee with a

$750,000 grant. The r emaining $250,000 would

be financed by the Northwest Ohio Development Fund

. Furthermore, the minimum revenue guarantee

would be supported by over $ 2 50,000 of cash marketing support and $ 8 77,525 of in

- kind services from

the airport and community. The minimum revenue guarantee would be made available for a two year

term for service between Toledo and Denver International Airport on Frontier Airlines

.

The proposed service would establish new air service from Toledo to the western United States, on e of

the region s least retained at the airport, as well as introduce a new network carrier brand to the airport.

We estimate the total market size from the Toledo area to Denver to be 77.8 Passengers per Day Each

Way, and between the Toledo area and the d estinations accessible on Frontier Airlines at 665.6

Passenger per Day Each Way. Frontier would only need to increase retention of Toledo area

passengers at Toledo Express Airport from 7.6% to 11 % in order for this service to be successful.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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9 

### AIR SERVICE OVERVIEW

Catchment Area

Toledo Express Airport is the primary commercial air service airport serving Northwest Ohio. The Toledo

Freemont Combined Statistical Area has a population of 729,662 . The population within a one

- hour

drive of the airport is approximately 1. 1 million and within a two

- hour drive is over 6.8 million.

Exhibit 1 : Drive Time Map for Toledo Express Airport
Source: Sixel Consulting GroupToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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10 

### Existing Air Service

The existing air service at Toledo Express Airport consists of only on e network carrier and leisure

- focused

carriers offering less

- than

- daily and seasonal flights. American Eagle currently offers three daily regional

jet flights to the American Airlines hub at Chicago O’Hare International Airport. The airport recently

conc luded negotiations on a minimum revenue guarantee with American Eagle to increas e service to

four daily flights beginning in November 2011. Allegiant and Direct Air offer less

- than

- daily flights to

alternative airports in major Florida tourist destination s. The frequency of these services changes

continuously throughout the year

, based on the seasonal patterns of the markets, as determined by the

carriers.

Exhibit 2: Current Service Map from Toledo

Source: OAG Schedules DataToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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11 

### Alternative Airports / Leakage Study

In April 2010, the Tole do

- Lucas County Port Authority commissioned Sixel Consulting Group to create the

Passenger Retention Study and True Passenger Market Size Analysis, more commonly referred to as a

leakage study. The study concluded that Toledo Express Airport was only retaining 7.6% of the 3,091

passengers originating in the Toledo area in 2009 . Over 82% of traffic from the region was carried by

flights from Detroit/Wayn e County International Airport, approximately one hour north of Toledo. The

current retention rate is likely worse than the reported 7.6% for 2009 as Delta Airlines has subsequently

discontinued its Toledo

- Detroit service which operated during the study p eriod,

Exhibit 3 : Leakage of Toledo Area Passengers to Alternative Airports
Source: Sixel Consulting Group 2008 Leakage AnalysisToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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12 

### Historical Air Service

The airport traffic has declined 71% since its last peak in 200 3

. The traffic reductions have bee n largely a

function of decreasing capacity

. The capacity reductions have been driven by specific events at the

air carriers and are not a reflection of the Toledo market. Flights to Atlanta, Cleveland, and Detroit were

a function of carriers retiring fl eets of aircraft, including the only aircraft deemed economically viable

for services to Toledo for that carrier. Cincinnati and Pittsburgh services were eliminated as part of

major hub realignments by air carriers.

Exhibit 4: Capacity and Traffic by Ye ar 2003

- 2010

Source: US DOT Data, Table DB1A

The network air service situation at Toledo Express Airport is actually worse than the airport

- wide

perspective would have it appear . The Airport has had success in recruiting less

- than

- daily leisure

focused carriers, including specialist Allegiant Air in 2005, and public charter company Direct Air in 2009

.
While these services are important to

, and well supported by

, the community, they mask the true

decline in network air service available at the airport.

The decline in traffic on network carriers is 82% as network carrier capacity has declined 78% since 2003.

By 2010 , the number of network carriers at the Airport has declined from six to two. The Delta brand,

which was removed from the Toledo market in l ate 2008, was reintroduced in January 2010 following 0 200 400 600 800 1,000 1,200 1,400

2003 2004 2005 2006 2007 2008 2009 2010

1,230 1,148

957

834

695

549

400 352 756 705

569 518
444

326

232 216 Seats per Day Each Way Passengers per Day Each WayToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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13 the carrier’s integration of Northwest Airlines and its long

- running Toledo service. The Northwest /Delta

Detroit service from Toledo ended in October 2010 , in favor of service to Delta’s Minneapolis/St. Paul

hub

. On March 31 , 2011 , Delta Air L ines has removed its Minneapolis service from Toledo and withdrew

from the airport. This has left American Eagle as the only network carrier at Toledo today.

Exhibit 5: List of Toledo Service Reductions and Extenu ating Circumstances

Source: US DOT Data T

- 100 Data

Destination Carrier End Date Circumstances

Pittsburgh US Airways Express Q3

- 2004* Hub Reduction/Re

- alignment

Chicago (Midway) ATA Connection Q1

- 2005* Carrier Liquidation

Atlanta Delta Connection 2Q

- 2008 Equipment Strategy Change

Cincinnati Delta Connection 3Q

- 2008* Hub Reduction/Re

- alignment

Cleveland Continental Connection 3Q

- 2008* Equipment Strategy Change

Detroit Delta Connection 4 Q

- 201 0 Equipment Strategy Change / Merger

Minneapolis/St. Paul Delta Connection 1 Q

- 2011* Equipment Strategy Change

*Note: Indicates the removal of the brand from Toledo, in addition to the end of nonstop service to that city.

Exhibit 6 : Capacity and Traffic by Year 2003

- 2010; Network Carriers

Source: US DOT Data, Table DB1A

0 200 400 600 800 1,000 1,200 1,400

2003 2004 2005 2006 2007 2008 2009 2010

1,230 1,148

949

717

605

464

308 263 755 704

562

426 368

249

147 136 Seats per Day Each Way Passengers per Day Each WayToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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14 As capacity at the airport has decreased, average fares for network carriers have risen dramatically.

Average one

- way fares for network carriers have increased 49% at Toledo since 2003, versus an

increase of 9% at Detroit over the sam e period. In 2010, average one

- way fares from Toledo, at $210,

were 23% higher than the next closest regional airport, Cleveland.

Exhibit 7 : Average One

- Way Fare (excluding Allegiant) in Select Markets

Source: US DOT Data, Table DB1A



### Air Service Development Efforts

In order to combat the capacity reductions and leaked passengers, the Toledo

- Lucas County Port

Authority has engaged in an aggressive Air Service Development campaign. The Authority has created

a comprehensive package of airport incen tives to offer air carriers that initiate new service at the

Airport. The package includes waived airport fees , marketing assistance, and marketing professionals

to be employed by the Authority.

$141 $140 $153 $179

$174 $196 $193 $210

$120 $130 $140 $150 $160 $170 $180 $190 $200 $210 $220

2003 2004 2005 2006 2007 2008 2009 2010 TOL DTW CLE CMH DAYToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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15 The Authority routinely communicates with air carriers about the incentive package and other data

relevant to Toledo air service at air service development conferences, headquarters meetings, and

other events where air carriers are present. Year

- to

- date , the Authority has held twelve meetings with

nine air carrier s regarding the potential for new air service in Toledo.

Exhibit 8 : Toledo Express Airport Air Service Development Meetings with Air Carriers, 2011 Year to Date

Air Carrier Sixel Consulting

Conference 2011 JumpStart 2011 Airline

Headquarters Other Opportunity

Allegiant X

American Eagle X X

Frontier X X

Gulfstream X X

SkyWest X

Southwest X

Sun Country X

US Airways X

Vision X

The Airport has been successful in recruiting less

- than

- daily leisure service. In 2005, Toledo was able to

recruit Allegiant Air to the Airport, with service to Orlando

- Sanford and Las Vegas. While Allegiant

decided to end the Las Vegas service, the airp ort worked with the carrier to add service to St.

Petersburg/Tampa Bay in 2006. The airport recruited public charter company Direct Air in 20 09 to

provide service to the southwest Florida region through Punta Gorda.

Due to the end of Delta service at T oledo, the Authority has negotiated a minimum revenue guarantee

for American Eagle, to support an increase from three to four daily flights. This $200,000 guarantee is

funded by the Authority’ s reserve fund. While the American guarantee is a completely i ndependent

project, it emphasizes the community’s commitment to maintaining network carrier service.

Finally, Toledo was also the recipient of a prior Small Community Air Service Development grant in 2006,

which did not result in the desired air service. This is discussed in more detail later in the application.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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16 

### AIR SERVICE NEEDS AND DEFICIENCIES

With a retention rate of air traffic of only 7.6% in 2009 , it is clear that Toledo is experiencing a

comprehensive lack of air service. This will be demonstrated by comparing Toledo to other regions with

a similar profile. We will also demonstrate that Toledo’s largest air service deficiencies are low

- fare

acc ess to the large cities in the w estern United States and access to large eastern metropolitan areas

.



### Comparable Communities

When evaluating the strengths and weaknesses of air service in a community, it is important to compare

the subject community to str ong corollaries in terms of both population and air service profile. Two

communities with similar profiles to Toledo are Lexington, Kentucky

, and South Bend, Indiana. All three

communities share the common trait of being in close proximity to large airli ne hubs in major cities.

While Toledo is the largest of the three cities with the highest per capita income , it is also the city with

the least air service and highest fares. Toledo also has the shortest drive

- time to the primary airport to

which it leaks

. These factors appear to be the primary drivers of the poor retention rate. Other potential

factors, such as population and total market size (indicated by Passengers per Capita if fully retained)

indicate that the markets are comparable, and that Toled o Express Airport fits the profile of an airport

which should retain at least half of the air traffic generated in its region.

Exhibit 9 : Table of Comparable Statistics for Toledo, Lexington, and South Bend

Sou rce: US Census Bureau; US DOT Data, Table DB1A ; Sixel Consulting Group

Stat i stic Toledo Lexington South Bend

Regional Population 729,662 692,392 563,596

Income per Capita $33,098 $33,044 $32,320

2010 O&D Passengers 157,560 1,029,740 595,780

Retention Rate 7.6% 52.6% 50.5%

Primary Airport Leaked To DTW CVG ORD

Airport to Airport Drive time 1:16 1:29 2:06

Passenger s per Capita 0.22 1.49 1.06

Passengers per Capita If F ull y Retained 2.84 2.83 2.09

Seats per Day Each Way 263 1,939 1,116

Seats per Capita 0.26 2.04 1.45

Average One

- Way Fare (ex cludes Allegiant) $210 $187 $185Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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17 

### Retention Analysis Details

Among Toledo’s leas t retained markets are those in the west and northwest regions of the United States

as defined by the Federal Aviation Administration.

Exhibit 10 : Toledo Retention by FAA Region

Source: Sixel Consulting Group

DTW TOL Other TTL

Region PDEW PCT PDEW PCT PDEW PCT PDEW

Southeast 674.8 78.2% 115.8 13.4% 71.4 8.3% 862.9

Great Lakes 238.9 77.1% 31.3 10.1% 39.1 12.6% 310.1

Alaska 7.7 93.0% 0.5 6.3% 0.1 0.7 % 8.3

Inte rnational 181.0 89.7% 11.6 5.8% 8.3 4.1% 201.9

Northeast 72.5 82.9% 4.3 4.9% 9.8 11.2% 87.4

Southwest 284.3 82.1% 16.5 4.8% 44.8 12.9% 346.4

East 325.1 85.3% 17.1 4.5% 37.9 10.0% 380.9

West 384.7 87.3% 18.8 4.3% 36.4 8.3% 440.8

Nort hwest 148.9 84.6% 7.5 4.2% 18.8 10.7% 175.9

Central 198.0 88.2% 8.9 4.0% 16.7 7.4% 224.5

Tota l 2,515.9 82.8% 232.3 7.6% 283.3 9.4% 3,091.1Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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18 In addition to being among the least retained regions for Toledo travellers, the West and Northwest

Regions are the location of seven of the twenty

- five largest airport

- pairs from the Toledo region.

Exhibit 11 : Distribution of Air Traffic for Toledo’s Largest Markets in 2009
Source: Sixel Consulting Group

DTW TOL OTHER TOTAL

Rank Airport PDEW PCT PDEW PCT PDEW PCT PDEW

1 STL 109.8 91.8% 3.7 3.1% 6.1 5.1% 119.6

2 MCO 103.4 90.0% 3.7 3.2% 7.7 6.7% 114.9

3 ATL 95.6 84.8% 4.4 3.9% 12.8 11.4% 112.8

4 MSP 84.8 84.7% 5.0 5.0% 10.2 10.2% 100.1

5 TPA 74.2 82.8% 3.0 3.3% 12.4 13.8% 89.5

6 LAX 78.7 89.0% 3.7 4.2% 6.0 6.8% 88.4

7 ORD 60.7 70.1% 19.4 22.4% 6.4 7.4% 86.5

8 DEN 64.6 83.1% 2.8 3.6% 10.3 13.3% 77.8

9 FLL 71.3 92.5% 2.0 2.6% 3.8 4.9% 77.1

10 BWI 61.0 82.5% 2.1 2.8% 10.9 14.7% 74.0

11 PHX 64.3 87.1% 3.2 4.3% 6.3 8.6% 73.8

12 LAS 63.6 91.6% 2.8 4.0% 3.0 4.3% 69.4

13 DFW 48.9 89.3% 2.8 5.1% 3.0 5.5% 54.7

14 LGA 57.5 90.3% 2.7 4.2% 3.5 5.5% 63.7

15 SAN 50.8 88.0% 2.3 4.0% 4.6 8.0% 57.7

16 DCA 44.1 86.6% 2.7 5.3% 4.1 8.1% 50.9

17 SFB 0.0 0.0% 46.1 100.0% 0.0 0.0% 46.1

18 BNA 39.2 87.2% 1.5 3.4% 4.2 9.4% 45.0

19 AUS 38.1 84.9% 1.9 4.3% 4.8 10.8% 44.9

20 BOS 37.9 85.3% 2.3 5.1% 4.3 9.6% 44.5

21 MCI 37.5 86.6% 1.7 3.9% 4.1 9.5% 43.3

22 SFO 36.9 85.6% 2.1 4.9% 4.1 9.5% 43.1

23 SEA 35.1 85.3% 1.9 4.7% 4.1 10.0% 41.2

24 RSW 37.2 91.8% 1.3 3.1% 2.0 5.0% 40.5

25 PIE 0.0 0.0% 39.8 100.0% 0.0 0.0% 39.8Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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19 

### STRATEGIC PLAN

Proposed New Route

The Toledo

- Lucas County Port Authority is proposing a Small Community Air Service Grant to support a

$1 million m inimum r evenue g uarantee for service to Denver. The proposed service would provide

Toledo with service to a destination with a large base of traffic and facilitate connections throughout

the western United States. Additionally, this service would help Toledo Express Airport retain passenger

traffic to regions with the lowest ret ention rate. Even without nonstop flights to Denver, the Toledo area

produces 78 passengers per day each way (PDEW) to Denver, and only retains 2 .6% of that traffic at

Toledo Express Airport

.

In addition to the minimum revenue guarantee created through p rogram and local funding, the Toledo

Express Airport would support the new air service with incentives. Incentives available to the air carrier

include waived airport fees, marketing assistance, and a Toledo

- based sales and marketing professional

to be em ployed by the Authority, but work at the discretion of the carrier.



### Goals

The Toledo

- Lucas County Port Authority has three goals with its Small Community Air Service

Development proposal for service to Denver:

 Improve access to Denver and other western d estinations with the addition of 95 to 140 daily

nonstop seats from Toledo to Denver

 Improve retention of Toledo area passengers at Toledo Express Airport

 Reverse the decline in O&D passenger traffic at the AirportToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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20 

### Target Airline Support

Frontier Airlines has expressed interest in operating the proposed service from Toledo to Denver. While

Frontier cannot commit to operating the service if the Toledo Express Airport receives a Small

Community Air Service Development grant, the carrier has indicated a minimum revenue guarantee

would reduce the financial risk associated with new service and could move Toledo

- Denver ahead of

other new service opportunities. A letter of support from Frontier Airlines has been included with this

application.

Should the Airport be unsuccessful in its attempts to recruit Frontier Airlines to Toledo, United Airlines and

Southwest Airlines also have large operations in Denver, which would facilitate connections throughout

the West

.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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2 1 

### Toledo

- Denver Traffic and Far e History

In 2000, the competitive environment at Toledo shifted and the average fare for Toledo

- Denver service

decreased by 39%, leading to a 177% increase in traffic. While Toledo was unable to retain all of that

traffic, the traffic levels remained el evated through 2004. When ATA and ATA Connection ceased

operations in early 2005, fares increased 43% and traffic declined 35%. Traffic declines since 2005

correspond to reductions in network carrier capacity.

Exhibit 12 : Passengers per Day Each Way and Average One

- Way Fares for Toledo

- Denver by Year

Source: US DOT Data; Table DB1A

Assuming the Toledo region continues produce 77.8 Passengers per Day Each Way as it did in 2009, then

the retention rate for Toledo Express Airport has dropped to 2.6% in 2010. This would be consistent with

expectations, given the Year

- over

- Year declines in network carrier capacity.

10.2 10.3 28.5

18.5

15.5

11.1 14.7

9.6

6.6 5.7

3.9 2.8 2.0 $191 $241

$147 $156 $146 $147 $134 $191 $204

$180 $200

$180 $174

$0 $50 $100 $150 $200 $250 $300

0 5 10 15 20 25 30

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Average One - Way Fare Passengers per Day Each Way (PDEW) Passengers per Day Each Way Average One-Way FareToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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22 

### Connecting Traffic and Revenue on Frontier via Denver

Service between Toledo and Denver on Frontier Airlines would also create new access t o 26 additional

cities the carrier offers beyond Denver.

Exhibit 13 : Non

- Circuitous Markets Frontier Could Serve from Toledo via Denver

Source: Sixel Consulting Group Hub BuilderToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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23 While the total market size available to Frontier appears small, when retention of leak ed passengers is

considered, the total potential market size available is 665.6 Passengers per Day Each Way with a

current retention rate of 3.8% . In order to be successful with one daily flight on a 100

- seat aircraft

,

Frontier would only need to increase retention of the se markets to approximately 1 2 %, and retention of

all Toledo markets to 10 %.

Exhibit 14 : 2010 Daily Passengers and Estimated Toledo Market Size in Potential Frontier Markets

Source: US DOT Data, Table DB1A and Sixel C onsulting Group



### Airport PDEW from TOL Retention Rate Total Market

DEN 2.0 2.6% 77.8

LAS 4.0 5.8% 69.4

LAX 3.3 3.7% 88.4

PHX 2.5 3.4% 73.8

SFO 2.2 5.1% 43.1

SAN 1.8 3.1% 57.7

SEA 1.5 3.7% 41.2

AUS 1.1 2.5% 44.9

SNA 1.0 5.1% 20.1

TUS 0.9 5.5% 16.6

SAT 0.8 3.2% 25.2

ABQ 0.6 2.0% 32.2

PDX 0.8 4.8% 16.4

SLC 0.7 4.2% 16.1

SMF 0.5 4.3% 12.7

ANC 0.4 6.3% 5.7

GEG 0.2 4.2% 3.6

SBA 0.2 4.3% 3.5

Others 0.8 4.7% 17.3

TOTAL 25.2 3.8% 665.6Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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24 

### Connecting Traffic and Revenue on United via Denver

Service between Toledo and Denver on United Airlines would also create new access to over 50

additional cities the carrier offers beyond Denver.

Exhibit 15 : Non

- Circuitous Markets United Could Serve from Toledo via Denver
Source: Sixel Consulting Group Hub BuilderToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

- 0119

25 While the total market size available to United appears small, when retention of leak ed passengers is

considered, the total potential market size available is over 7 5 0 Passengers per Day Each Way with a

current retention rate of 3.9% . In order to be successful with two daily flights on 70

- seat aircraft

, United

would only need to increase retention of these markets to 1 4 % and retention of all Toledo markets to

11%

Exhibit 16 : 2010 Daily Passengers and Estimated Toledo Market Size in Potential United Markets
Source: US DOT Data, Table DB1A and Sixel Consulting Group



### Airport PDEW from TOL Retention Rate Total Market

DEN 2.0 2.6% 77.8

LAS 4.0 5.8% 69.4

LAX 3.3 3.7% 88.4

PHX 2.5 3.4% 73.8

SFO 2.2 5.1% 43.1

SAN 1.8 3.1% 57.7

SEA 1.5 3.7% 41.2

SJC 1.2 7.2% 16.0

AUS 1.1 2.5% 44.9

SNA 1.0 5.1% 20.1

TUS 0.9 5.5% 16.6

SAT 0.8 3.2% 25.2

ABQ 0.6 2.0% 32.2

PDX 0.8 4.8% 16.4

SLC 0.7 4.2% 16.1

SMF 0.5 4.3% 12.7

HNL 0.5 4.3% 12.1

ELP 0.5 4.8% 9.4

RAP 0.4 4.0% 8.9

FAT 0.3 4.3% 7.0

PSP 0.3 4.3% 6.7

Others 3.2 4.6% 68.4

TOTAL 30.0 3.9% 764.1Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

- 0119

26 

### Connecting Traffic and Revenue on Southwest via Denver

Service between Toledo and Denver on Southwest Airlines would also create new access to 21

additional cities the carrier offers beyond Denver.

Exhibit 17 : Non

- Circuitous Markets Southwest Serve from Toledo via Denver
Source: Sixel Consulting Group Hub BuilderToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

- 0119

27 While the total market size available to Southwest appears small, when retention of leak ed passengers is

considered, the total potential market size available is over 6 50 Passengers per Day Each Way with a

current retention rate of 3.8%. In order to be successful with one daily flight on a 137

- seat aircr aft

,

Southwest would only need to increase retention of these markets to 1 5 % and retention of all Toledo

markets to 11%.

Exhibit 18 : 2010 Daily Passengers and Estimated Toledo Market Size in Potential Southwest Markets

Source: US DOT Data, Table DB1A and S ixel Consulting Group



### Airport PDEW from TOL Retention Rate Total Market

DEN 2.0 2.6% 77.8

LAS 4.0 5.8% 69.4

LAX 3.3 3.7% 88.4

PHX 2.5 3.4% 73.8

SFO 2.2 5.1% 43.1

SAN 1.8 3.1% 57.7

SEA 1.5 3.7% 41.2

SJC 1.2 7.2% 16.0

AUS 1.1 2.5% 44.9

SNA 1.0 5.1% 20.1

TUS 0.9 5.5% 16.6

SAT 0.8 3.2% 25.2

ABQ 0.6 2.0% 32.2

PDX 0.8 4.8% 16.4

SLC 0.7 4.2% 16.1

SMF 0.5 4.3% 12.7

Others 0.7 4.3% 15.2

TOTAL 25.6 3.8% 666.8

While at this time, Southwest Airlines entering smaller markets like Toledo seems unlikely, one of the

stated goals of the carrier in its merger with AirTran is to learn new ways to be successful in smaller

markets. One implication of that is that Southwest may be more willing to consider smaller markets such

as Toledo than it has been in the recent past.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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28 

### Grant Amendments / Alternative Strategie s

The primary air service development goal of the Toledo

- Lucas County Port Authority is for the Toledo

Express Airport to retain a greater portion of the air traffic generated in its catchment area. This

application seeks to increase retention in some of Toledo’s largest markets with the smallest retention

rates. The Authority believes the success of this service, as well as recently announced additional

American Eagle service, will serve as the springboard f or additional service restoration and improved

retention rates at the Airport.

In the event the Department grants Toledo an award to for service to Denver, but the community is

unsuccessful in its efforts to recruit Frontier Airlines to operate the service, the Authority would then

approach other car riers to service the route

. The most likely would be United Airlines and Southwest

Airlines, as they also have major connecting operations in Denver which support access to the western

United States. If all attempts to secure Denver service are not succe ssful, the Authority may request the

Department consider redirect ing award funding to assist in recruiting service to other hub airports which

would also service regions with large traffic bases and low retention rates from the Airport. These hubs

would i nclude Charlotte on US Airways, Dallas/Fort Worth on American Airlines, Houston on United,

Philadelphia on US Airways, and Washington

- Dulles on United.



### Path to Sustainability

The Authority agrees with the Department that the air service developed must be sustainable without

assistance in the long term. The Authority’s application seeks to mitigate the air carrier’s risk during the

start

- up period of the new service. It is ant icipated that at the end of the two

- year minimum revenue

guarantee program, the flight service will be economically viable. While the revenue guarantee would

expire at the end of two years, the Authority would continue to provide the Toledo

- focused sales and

marketing professional to ensure continued success of the new air service.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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29 

### Previous Grant Award and Return

On August 31, 2006, the Toledo Express Airport was awarded a Small Community Air Service

Development Grant to support a minimum revenue guarant ee for JetBlue Airways or other service to

the New York City region. The Authority had over twenty

- five meetings with air carriers regarding New

York service between 2006 and 2010. The Authority recruited a new entrant carrier, Air Azul / Jet

America to fly between Toledo and Newark

- Liberty International Airport in 2009. Despite selling tickets

to passengers, Jet America never began any operations, including the Toledo

- New York route. The

grant funds were returned to the Department on August 30, 2010

.

At th e time of the 2006 grant application , the trend towards capa city reductions was established. Even

so, Toledo Express Airport enjoyed access to five hub airports within four airline systems. The airport had

also successfully recruited Allegiant Air to operate nonstop flights to targeted leisure destinations. During

the subsequent years , there were several changes in the airline industry beyond the control of the

Authority which contributed to its inability to successfully utilize the grant.

We disc ussed earlier in this application the airlines’ changing aircraft utilization, fleet, and hub strategies,

and their impact on Toledo’s deteriorating capacity. In fact, Toledo’s average daily seat capacity

declined 57% between 2006 and 2010. These same in fluences impacted any attempt to increase

service at Toledo during this period , including the utilization of the grant award ed in 2006

. Particularly

,

JetBlue announced in December 2006 a plan to defer deliveries of the 100

- seat EMBRAER E

- 190,

deemed criti cal to success on the Toledo

- New York route in the 2006 application . This was followed by

additional announcements of fleet changes in May 2008 and June 2011. The most recent

announcement included the information that JetBlue ultimately plans to operate a smaller fleet of E

190’s and a larger fleet of higher

- capacity Airbus aircraft. These events significantly altered Toledo’s

opportunities in the JetBlue network.

Additionally, the Authority could not predict the outcome of New York airspace reform to i nclude

massive new slot administration programs. Announced by Department Secretary Peters in late 2007

and implemented in early 2008, the slot programs capped hourly airport activity at John F. Kennedy

International Airport and Newark Liberty Internationa l Airport and issu ed slots, or operating authorities,

by time and airport, to the carriers. With slot restrictions already in place at LaGuardia Airport, all threeToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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30 airports became instantly constrained, from an economic perspective. While runway constrai nts are

considered by carriers, a formal slot program has the impact of increasing “opportunity cost”, as carriers

must then decide the best use for each individual slot with no ability to entertain increase d capacity

through other means, such as operation al or scheduling changes

. This worked against the 2006 Toledo

grant.

Other restraints from utilizing the 2006 grant were a lack of air carrier support and lack of alternative

options. While the target of the 2006 grant was clearly defined as JetBlue ser vice to the New York/New

Jersey metropolitan area, JetBlue (or any other air carrier) declined to formally support the service, even

with a non

- committal letter. Also, the lack of a clearly defined alternative plan in the 2006 grant

application left the D epartment and Authority with no ability to change the plan when some of the

other issues became apparent.

We believe all of the issues outlined above are addressed in this application, and will not inhibit the

Authority from making use of any grant fundin g that may be awarded related to this application

.
Specifically,

 This application includes specific and considered alternative plans should they become

necessary.

 This application includes a letter of support from Frontier Airlines, the primary air carrie r target.

 Denver International Airport, n or any of the alternative plan airports, have or are anticipated to

have any type of airport capacity restraints now or in the future . All are well functioning hub

airports which have been designed with capacity additions in mind.

 Frontier Airlines, as well as the alternative carriers mentioned, have a wider range of aircraft

types, utilization, and hub strategies, which should enable the Authority maximum flexibility when

recruiting the air carrier.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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31 

### PROJECT IMPLEMENTATION, MONITORING, AND FUNDING

Public / Private Partnerships

The Public / Private partnerships supporting this grant application include:

 The Toledo

- Lucas County Port Authority and Toledo Express Airport

– the Authority is the legal

sponsor of the application and manages the airport on behalf of the City of Toledo.

 Lucas County Improvement Corporation

– The LCIC is a private, non

- profit organization founded

in 1964. The LCIC and its member agencies provide economic development assistance for

Lu cas County.

 Regional Growth Partnership

– The Regional Growth Partnership is a private

- sector driven and

funded economic development company, focused to meet the needs of clients in a

confidential, innovative, and time

- sensitive fashion.

 The Toledo Chamber of Commerce

– The Chamber is an active supporter of the Airport.

 The City of Toledo

– The City is an active supporter of the Airport.

 Lucas County

– The County is an active supporter of the Airport.

 The University of Toledo

– The University, the largest i n northwest Ohio, recognizes the critical

need for good and affordable air service that supports the ability of the University to recruit and

retain staff and students.

 Northwester n Ohio Regional Economic Development Association

– NORED is an association o f

twelve counties in Northwest Ohio which has been assisting business growth in Northwest Ohio

since 1988. Its large board membership includes private and public sector representatives with a

stake in the economy of northwest Ohio. The association has be en very effective in developing

a unified voice among its members and impacting decisions at the state capitol and in

Washington, D.C.

 Quick Flight Aviation

– Quick Flight provides airline ground handling services at airports

nationwide, including at Toled o Express Airport.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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- 2011

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32 

### Project Funding

The community is seeking a Small Community Air Service Development grant in the amount of $750,000

in order to support a $1 million minimum revenue guarantee. The remaining $250,000 is proposed to be

supported by th e Northwest Ohio Development Fund, financed by members of the Lucas County

Improvement Corporation (LCIC)

. The LCIC, a private, non

- profit organization, was founded in 1964 to

encourage and promote the economic and civic development of the Toledo area. I t is anticipated

that the minimum revenue guarantee will be provided to the air carrier for a term of two years from the

start of service.

In addition to the minimum revenue guarantee, the airport will provide $ 2 50,000 in cash marketing

support to the car rier. It carrier will also receive $ 8 77,025 worth of in

- kind support, including waive d

airport fees

, a sales and marketing professional at no cost , and additional marketing support from

media outlets in our community

.

Exhibit 19 : Summary of Sources, Type, and Uses of Funding

Funding Use Minimum Revenue

Guarantee Marketing

Support Marketing

Support Airport Fee

Waivers Total

Funding Type Cash Cash In

- Kind In

- Kind Combination

Department of

Transportation $750,000 $750,000

Northwest Ohio

Development Fund $250,000 $250,000

Toledo

- Lucas County Port

Authority and Toledo

Express Airport $ 2 50,000 $ 6 42,025 $892,025

Various Media Partners $235,500 $235,500

Total 1,000,000 $ 2 50

, 5 00 $ 235

, 5 00 $ 6 42,025 2

, 127

, 5 25Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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33 

### Implementation Timeline

The proposed implementation timeline for the project assumes the Department will award Small

Community Air Service Development grant funding in September 2011. Once the award is announced,

the Airport and the Authority will begin discussions with Frontier Air lines to begin service between Toledo

and Denver. Based on airline planning lead times, the need for advanced bookings, and the ideal

seasonality for service start , we would anticipate flights would begin in May 2012.

The first two milestones on the Airp ort’s timeline are to execute the agreement with the Department and

to negotiate the minimum revenue guarantee details with Frontier Airlines. Once the new service is

announced and schedule and fares made public in reservations systems and on

- line booking engines,

the Airport and the carrier will begin marketing the service and monitoring advanced bookings. The

marketing program can and will be adjusted through the life cycle of the program, based on

advanced bookings and carrier feedback. The Airport wi ll submit quarterly grant status reports to the

Department through the two

- year term of the agreement.

Exhibit 20 : Proposed Project Timeline

Activity/Milestone Conservative Schedule

SCASD Grant Award Announcement September 2011

Execute Grant Agreement with DOT November 2011

Negotiate Minimum Revenue Guarantee with Airline November 2011

– January 2012

Announce Service/Publish Schedule January 2012

Market Service/Monitor Advance Bookings January 2012

– May 2014

Launch Service May 2012

Operate Service with MRG May 2012

– May 2014

Submit Grant Status Reports to DOT Quarterly Q 2 2012

– Q2 2014Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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34 

### Success Metrics

Success will be based on achieving the objectives of the program. The Airport will work with the carrier

to continuo usly monitor advanced bookings and other financial metrics of the service. With a joint

understanding of the market conditions, the airport and air carrier can work to adjust marketing

programs and other factors to ensure success of the project.

Exhibit 21 : Pr oject Goals and Success Metrics

Project Goal Success Metric

 Improve access to Denver and other

western destinations with the addition of 95

to 140 daily nonstop seats from Toledo to

Denver  Market Size growth in the Toledo

- Denver

and largest beyond market s in the western

United States

 Improve retention of Toledo

- area

passengers at Toledo Express Airport  Increased retention of Toledo

- area

passengers in targeted markets

 Reverse the decline in O&D passenger

traffic at the Airport  Increased O&D traffic measured quarterly

on a Year

- over

- Year basis

Once service begins, the Airport will rely upon traffic and revenue data provided directly by the airline

and the amount of reimbursements requested by the airline as indications of project success.

Departme nt data, including Tables T

- 100 and DB1B, will be analyzed quarterly to compare year

- over

year market size growth. The Airport will conduct a leakage analysis after at least one year of service in

order to ensure that the retention goal is being met. The Airport will report its success metrics in quarterly

grant status reports to the Department.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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35 

### Legal Sponsor

The legal sponsor of this project is the Toledo

- Lucas County Port Authority. Toledo Express Airport is

owned by the City of Toledo, but operat ed (at a loss) by the Authority under a long

- term management

agreement. The Authority is a government agency with the ability to levy property taxes, however it

currently derives over 90% of its revenues through user fees.

Toledo

- Lucas County Port Author ity

11013 Airport Highway

Toledo, Ohio 43558

Paul L. Toth

Chief Executive Officer and Airports Director

(419) 865

- 2351

www.toledoportauthority.org



### Financial Controls

As the sponsor, the Toledo

- Lucas County Port Authority will be responsible for all fiscal matters related to

the grant, as well as the Department’s reporting requirements. The Department can be assured that

adequate financial controls are in place at the Authority to guarantee that any grant awarded is used

in accordance with the program as administered by the Department. The Toledo

- Lucas County Port

Authority understands that the Small Community Air Service development program grants are

reimbursable, me aning the Authority is responsible for program expenditures and will submit invoices to

the Department for reimbursement for the portion of the minimum revenue guarantee funded by the

Department.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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36 

### Use of Local and Department Funds

The Port Authority and designated legal sponsor will ensure that both Department and local funds

associated with this project are expended in a manner consistent with the Grant intention and the

contract between the Department and the Airport. This is a Grant for a minimum reve nue guarantee

with a clear target market and established methods that will be utilized with Grand funds.



### Return on Investment

Toledo’s t rue catchment area demand for travellers to destinations it serves in the western United States

is estimated at 433,0 00 annual O&D passenger trips. For Frontier to be successful and increase retention

to approximately 15% from the western United States, that would require an increase in annual traffic by

almost 5 5,000 passengers, or just 10% of the Toledo

- area market sha re.

A study in 2004 indicated that each Airport passenger has a value of $50 to the airport and local

economy in direct, indirect and induced economic impact. Thus, the impact of Frontier Airlines service

to the Toledo region could be as high as $2.7 mi llion.Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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37 

### APPENDIX: LETTERS OF SUPPORTToledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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38Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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39Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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40Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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41Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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42Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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43Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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44Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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45Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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46Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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47Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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48Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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49Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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50Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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51Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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52Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

- OST

- 2011

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53Toledo Express Airport

Proposal Under the Small Community Air Service Development Program; Docket DOT

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- 2011

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54