DOT Docket OST-2012
- 0069

BEFORE THE OFFICE OF THE SECRETARY UNITED STATES DEPARTMENT OF TRANSPORTATION


## Proposal forA Grant UnderThe 

# Small Community Air Service Development Program

Submitted by



## DUNS 

## # 067207746 Congressional District 

## # 13Proposal underthe Small CommunityAirService Development Program OST-2012- 0069 2 

# Table ofContents
Contents Proposal Data At-A-Glance 

### 3 1. Proposal Summary 

### 4

The Southwest DecisionTo Drop 360,000 Annual SRQ Passengers 4 A DeficiencyThat Cannot Be Reversed By Incumbents 5 AirTran Losses Are Not Recapturable WithoutAdditional Capacity 5 Westbound Service ShortfallsAre AdditiveTo AirTran Losses 6 Grant Funding: Attract New Hub Gateway Service & Address Westbound Shortfall 6 TrafficTrends
- Not Encouraging 7 Westbound Fares Are High 8 2. The GrantApplication 

### 9

TargetAirports & Airlines Are Identified 9 3. Plan for Grant Implementation.........................................................................11 Plan and Timeline 11 Ensuring Self- Sufficiency 11 Summary ofSRQ AirService Recruitment Efforts 12 4. GrantAdministration & Management

............................................................... 13

Term ofGrant 13 Funding Sources and Allocation 13 Risk Abatement Funding 13 Marketing and Advertising Program 14 In-Kind 14Proposal underthe Small CommunityAirService Development Program OST-2012- 0069 3 

# Proposal Data At-A-Glance
A. Airport and Community Name Sarasota Bradenton International Airport Official Sponsor: Sarasota Manatee AirportAuthority Tel: (941) 359-5200 B. Additional Community Members The Airport isjoined bythe Sarasota Convention And Visitor Bureau and the Bradenton Area Visitors Bureau in submitting this application and in the administration ofthe grant. C. Project Sponsor The Sarasota Bradenton International Airport is the official sponsor ofthis grantapplication. D. Project Description The grant will be used to implement and market new service to alleviate significant air service deficiencies represented by lack of access to a Western US airline gateway, and concurrently by the decision by Southwest to pull AirTran
- representing nearly one-third of SRQ's passengers - out ofthe market. The Sarasota Bradenton International Airport and the community appreciate this opportunity, and lookforward tofavorable consideration bythe Department. Correspondence regarding this documentshould be directed to: Mr. Fredrick Piccolo President & Chief Executive Officer Sarasota Manatee AirportAuthority 6000Airport Circle Sarasota, Florida 34243 Tel: (941) 359-5200 Email: Frederick.piccolo@srq-airport.comProposal underthe Small Community Air Service Development Program OST-2012
- 0069 4 

# 1. Proposal Summary Statementof Deficiency Sarasota Bradenton suffers from a lack of access to a westbound airline gateway. This forces local consumers to drive to other airports, thereby inflicting economic damage on the local economy. A secondary, but much more immediate and damaging deficiency, is the lost traffic resulting from the unexpected departure ofAirTran Airways from the SRQ market. The Sarasota Bradenton International Airport is requesting a grant in the amount of $500,000 to address this majorairservice deficiency, which is a material economic hardship on the region's competitiveness in the global economy. The Airport, and the community led by the Sarasota Convention and Visitors Bureau and the Bradenton Area Convention and Visitors Bureau, are contributing an additional $500,000, representing a hard-dollar 100% match. As outlined in the DOT Appendix C, an additional $315,000 in in-kind support is also being provided. This grantwill address both deficiencies, and the Community would respectfully submitthat these fit the intent of Congress when it initiated the Small Community Air Service Development Grant Program. 

### ServiceJanuary2012 ServiceSeptember2012

The Southwest Decision To Drop 360,000 Annual SRQ Passengers The map indicates that the westbound access issue has been exacerbated by the loss of AirTran, which carried over 120,000 passengers annually to Chicago/Midway.Proposal underthe Small CommunityAirService Development Program OST-2012- 0069 5
AirTran Airways was purchased by Southwest Airlines in 

### 2010. In the filing, Southwest stated that existing AirTran markets would not be adversely affected by the merger. This statement made to the DOT did notturn outto be accurate. Subsequentto DOT approval of the merger application, Southwest announced it would close 15 former AirTran stations, including Sarasota Bradenton. A DeficiencyThat Cannot Be Reversed By Incumbents While this was a business decision on the part of Southwest, it nonetheless was 

### a major blow to the air service and economic competitiveness of the region served by Sarasota Bradenton International Airport. AirTran accounted for over 

### 360,000 passengers (nearly 

### 30%) at SRQ in 

### 2011, and achieved load factors of nearly 

### 80%- and well overthatfigure to its hubs at ATL and BWI. A view of carrier shares at SRQ in 

### 2011 is instructive of the air service deficiencythatthe AirTran departure has created: 

### Carrier

Note that AirTran generated almost 

### 1,000 passengers per day 

### (498 each way). With the high load factors at the remaining incumbents, this demand simply cannot be recaptured, and the majorityofthese passengers will become leakage toTampa, in the process inflicting enormous economic impactdamageto the Sarasota Bradenton economy.' AirTran LossesAre Not Recapturable WithoutAdditional Capacity With current capacity, most of the 

### 360,000 passengers being lost due to AirTran are not recapturable on existing incumbentservice, which is at, or over, 

### 80% load factors.



### IAirTran Pax Lost I 

## I 1,078,939 908,091 170,848 363,476

In fact, if

### illlthe remaining SRQ carriers recaptured AirTran passengers with 

### illl ofthe (few) empty seats they have available (which functionally is not possible, but is reviewed here to show the gravity ofthe deficiency), over 

### 190,000 passengers that formerly used SRQ would need to driveto otherairports.2

1 Source: US DOTdata, analyzed byAviation DataMlner. Fares are average OW, including federal fees and taxes. 2 Based on year 2011 capacity & seats occupied on all other carriers, compared to the passenger traffic carried by Air'Tran.Proposal underthe Small Community Air Service Development Program OST-2012- 0069 6
This loss ofcapacity cannot be shifted to other carriers. Firstly, SRQ enjoys service primarily with mainline-size aircraft. Therefore, in most cases incumbents don't have the option of shifting to larger-gauge airliners. Secondly, adding frequencies for the network carriers
- Delta and US Airways
- is not possible, as such flights would not meet connecting banks at their hubs. The remaining carrier, JetBiue, focuses mainlyon trafficto New York City. The only option for SRQ to meetthe challenge is recruitment of access to additional network airline service. This is the focus ofthe grantapplication. Westbound Service ShortfallsAre AdditiveTo AirTran Losses Prior analyses by the Airport indicate that the loss of passengers that use Tampa instead of SRQ to access points west ofthe Mississippi exceed 70,000 annually. In addition, the loss of the connectivity of AirTran over its Atlanta hub represents another 18,000 passengers to points in the West. Therefore, in addition to the traffic lost locally due to AirTran, the deficiency in SRQ westbound access adds nearly another 100,000 lost passengers. The Airport and the Community are confident that the funding requested herein will, in a very shorttimeframe, begin to address and reverse this situation. Grant Funding: Attract New Hub GatewayService & Address Westbound Shortfall Analyses by SRQ indicate that the best option for filling the AirTran gap is to recruit service to an additional west-oriented hub. As noted above, the two major East Coast hubs currently served from SRQ (US/CLT and DL/ATL) have little potential for additional capacity.3 Other, non-served East Coast hubs
- in particular UA/IAD and UA/EWR
- do not offer the geographical connectivity needed, and two of the major markets
- New York and Boston already have nonstop service. Part of the AirTran gap will be filled by United, which is adding a single daily flightto Chicago/O'Hare in November.4 Therefore, the main goal for SRQ is to gain access to one ofthree specific airline connecting hubs: United/Denver, Frontier/Denver, United/Houston, orAmerican/DFW.5 The intent of the grant is to provide a revenue guarantee to support full-year service between SRQ and one of these gateways. This will help reverse a major and continuing decline in airservice capacity at Sarasota Bradenton International Airport.

3 SRQ staffhave been In liaison with both airlines in this regard.

. 4 While Important, the single daily UA 737-800 will not come close to recapturing the 120,000 annual MDW passengers carried by AlrTran from SRQ. 5 Southwest also has a connecting hub at Denver, and would certainly be welcomed backto SRQ. While the airport specifically will Include WN as a potential carrier underthis grantapplication, as a practical matter, based on direct discussions with the carrier, such is a very distant possibility.Proposal underthe Small CommunityAir Service Development Program OST-2012- 0069 7
TrafficTrends
- Not Encouraging The Airport is fully aware that the US airline industry is not one in a growth mode. FAA forecasts indicate almost no growth in passenger traffic in the coming year, and only slow growth thereafter. SRQ, while a vibrant market, has seen the effects ofthis airline capacity shrinkage. What is disturbing
- and pertinent to this application
- is the additional effects of the unexpected departure ofAirTran. 

### Loss ofAirTran 

### & Lack ofWestboundAccess= Service Deficiency 850,000

800,000

750,000

700,000

650,000

600,000

550,000

500,000

450,000

400,000 2007 2008 2009 2010 2011 Orig2012 New2012 2013 Fest The current forecast indicates that, in the absence of additional capacity (which the market can demonstrably support), passenger traffic could decline in 2013 by as much as 16% compared to year 2011. This is not due to lack of demand, but simply due to the fact that the on-going lack ofwestbound access has combined with the loss ofa carrier that was the foundation foralmost 30% ofthe trafficat SRQ. The solution is accessing additional capacity to the west, as this grantwill make possible.Proposal underthe Small Community Air Service Development Program OST-2012- 0069 8
Westbound Fares Are High Buttressing the above point, a review of fare levels to key points in the US West clearly show that SRQ has much higher fares than the airports with which it competes for passengertraffic.

The data is for the full year 2011, and fares are average OW, including federal fees and taxes. The service intended to be recruited will be a factor in moving SRQ fare levels downward tothese and otherdestinations.Proposal underthe Small CommunityAir Service Development Program OST-2012
- 0069 9 

# 2. The GrantApplication TargetAirports & Airlines Are Identified This application is very carefully aimed at specific carriers and gateways. It is not the "route" that is important, but the connectivity to the west represented by each specific gateway
..

As part of its active on-going air service development program, SRQ is in contact with the carriers targeted by this grant application. None are in a particularly strong growth mode at this time, but doexpress interest in the potential ofthe SRQ market, ifthere are substantial risk-offsets to entering the market. Sarasota-Bradenton International, with high leakage ofwestbound traffictoTampa, and the departure ofAirTran, represents an opportunity to each of these carriers. However, as the Department knows, there are changes in strategy going on at each ofthe targeted airlines. American is reorganizing in Chapter-11 bankruptcy. United is re-thinking the role and size of its IAH hub, and Frontier is rebuilding Denver. Therefore, with the grant award, SRQ will approach each carrier with an aggressive marketing program along with an industry-standard revenue guarantee program. SRQ is proud that in 2003 it was awarded a SCASD grant which, paradoxically, recruited AirTran. The marketing and support ofthat initial SRQ-ATL market incubated AirTran service later on to Indianapolis, Chicago, New York, Boston, and Baltimore, some on a year-round basis, and some on a seasonal basis. The point is that SRQ understands how to make a SCASD grantdeliver newtraffic and eliminate airservice deficiencies.Proposal underthe Small CommunityAirService Development Program DST-2012- 0069 10
One such deficiency was the lack of Chicago service. Because ofthe success ofthe SCASD grant in anchoring AirTran at SRQ, the carrier initiated service to Midway Airport, capturing over 120,000annual passengers.6 This aggressive support and implementation process will again be applied tothe 2012 grant.

• It is again emphasized that the AirTran pull-out at SRQ was purely a business decision on the part ofSouthwest, which has much higher costs than AirTran, and apparently intends to try to shift the former SRQ/AirTran passengers onto Itsflights atTampa. The SRQ market- by the admission ofAirTran management- was successful and profitable.Proposal underthe Small CommunityAir Service Development Program OST-2012- 0069 11 

# 3. Plan for Grant Implementation
Plan and Timeline The Sarasota Bradenton International Airport, along with its community partners, have in place plans to implement contact with target carriers immediately upon notification of grant award. The Airport has forecasts and revenue projections ready. There will be no delays waiting for route and marketanalyses. These have been accomplished. The program envisioned will follow the earlier and very successful revenue-guarantee program made possible bythe SCASD program at SRQ. This will include: 

## + Performance Standards. It is understood thatthe carrier will be contractually required to provide the service in accordance with pre-determined standards for on-time flights and schedule completion. The carriers under consideration are excellent, high-quality operators. However, it is importantthat strict standards be put into the agreement. 

## + Revenue and Cost Determinations. The per-segment costs of the service will be determined in advance. These will include an adjustment for up or down shifts in fuel costs to the airline. The plan is to establish strict per-flight costs, and weigh these againstthe net-new trafficthat SRQ will generatefor the target carrier's entire system. 

## + Six-Month Analyses. The airline will be required to provide monthly data regarding traffic and revenue generation, with substantiation for all incurred expenses. At the end of each six-month period, settlement will be accomplished. If revenue goals are met, no funds will be due the airline. 

## + Marketing. SRQ is an airport industry leader in focused marketing research. Asjustone example, should United/Denver or Frontier/Denver be approached, the airport has the capability of generating detailed reports regarding second-home ownership levels between Colorado and the West Coast of Florida.' (Because this application is a public document, the Airport is reluctant to share its air service development approaches with othercompeting airports. However, the fact remains thatthe marketing and promotional efforts at SRQ are unmatched. The success ofthe earlierSCASD grant is clear proof.) Any agreementwill be pre-approved bythe Department. Ensuring Self- Sufficiency As seen in the unexpected decision by Southwestto cut out of its system profitable SRQ and the 360,000 passengers it generates, SRQ fully understands that the airline industry is notoriously unpredictable. Therefore, the Sarasota Bradenton International Airport recognizes that changes outside of its immediate control could affect a carrier's decision to continue service. Should the new air service not achieve satisfactory financial results during the first months of operation, or if strategic shifts at the carrier result in the potential that the service may be in jeopardy, the community will work with the carrierto pinpoint solutions acceptable to the carrier to stay in the market.

7 This approach was a key factor in the decision ofUnited to implement Chicago/ORO
- SRQ service in late 2012.Proposal under the Small CommunityAir Service Development Program OST-2012- 0069 12

If the shortfall is primarily in one segment of the traffic bases, for example the local business community, the Airport will redouble efforts to ensure that a reasonable and sustaining portion of local business travel budgets are allocated tothe newservice. In another example, if the new service is not achieving a proportional share of inbound Convention and Meeting business, the Airport will work with local resorts to find a mechanism to give the new service better access to the Convention & Meeting Planners that book airtravel. Some optionsforaddressing route traffic and revenue performance shortfalls include: 

## + Re-focusing advertising and promotional efforts or, if outside the sequence of planned and budgeted events, initiating special service promotion. 

## + One-on-one meetings with the carrier, outlining where SRQ feels energy can be applied to assure the carrierfinds the market economically-viable. The Airport is confident in itsforecasts and in its marketing and marketing research. SummaryofSRQ Air Service Recruitment Efforts The Department is familiarwith the airservice efforts and successes ofSRQ Since 2003:
• AirTran service was recruited to Atlanta, Boston, New York, Indianapolis, Baltimore/Washington, and Detroit. Some ofthese markets were seasonal and added as the carrier identified the opportunity.
• JetBiue has initiated low-fareservice to New York/JFK and Boston.
• US Airways has initiated service to Washington/Reagan.
• American initiated service to its hub in Miami. The service was discontinued as the airline shifted significant amounts ofturboprop aircraft resources out of MIA.Proposal underthe Small Community Air Service Development Program OST-2012
- 0069 13


# 4. GrantAdministration & 

# Management

Term of Grant The service deficiencies outlined in this document are certainly a challenge for SRQ. On the other side of the coin, they represent new revenue opportunities for the target carriers. Therefore, theterm ofthe grant is requested to be two years. Funding Sources and Allocation The amount requested in this application is $500,000. The Sarasota Convention & Visitors Bureau and the Bradenton Area Convention & Visitors Bureau each have committed a hard $100,000 to be spent in marketing and advertising to assure success of the new service. The Airport is contributing an additional $300,000 to marketing as well.8

-·$500,000

RiskAbatement Funding The structure ofthe Risk Abatement contract is envisioned as follows: 

## + SRQ will negotiate an agreed-upon target revenue perflight. 

## + SRQ and the airline will develop a structured, scheduled and formalized revenuedetermination formula. This includes the local O&D revenue, plus the SRQ segment's portion of system connecting traffic revenue, ancillary fees, cargo revenue and other revenue. 

## + A computation will be made on a monthly basis ofthe progress of the new service. The carrier will agree to provide the Airport with advance booking reports and previous month'strafficand revenue results every thirty days. 

## + The settlement for the revenue guarantee will be accomplished preferably after each six months ofservice.

8 By statute, these community organizations are precluded from participating in any revenue guarantee programs. This Is the reason they will assume all financial responsibility for the marketing costs. Note thatthe source of the airport funding portion Is in complete compliance with all FAA rules and requirements. The Department will be provided periodic summaries ofthe activities and spending ofthese funds.Proposal underthe Small CommunityAir Service Development Program OST-2012
- 0069 14 Marketing and Advertising Program SRQ, with its ready marketforecasts and market research capability, will initiateappropriate and timely advertising and promotional efforts upon completion of a signed agreement with the carrier to provide service. The $500,000 in total marketing support is allocated to the airline for their use in applying the marketing program, and is reimbursed to the airline with appropriate invoicing and documentation. A multi-dimensional approach is envisioned: 

## + Local print media advertising illuminating the new service, as well as the range oftotal airservice options available atSarasota Bradenton International Airport. 

## + Because the majority of passengers are inbound generated to SRQ, the airport will endeavor to identify key decisional drivers at major points on the target carrier's route system. The airline will be provided in-depth data regarding traffic and passenger demographics, to best focus marketing and consumer awareness efforts. 

## + Presentations will be made at key civic organizations to mobilize them to make outreach effortstotheircontacts across the target carrier's route system. Promotional program specifics will be determinedjointlywith the airline. In-Kind The Airport has an aggressive air service recruitment program. As outlined on DOT Appendix C, the value of this program to the target carrier is $315,000 in addition to the hard dollar support listed above.

### May

30, 2012 Mr. Fredrick Piccolo President Sarasota Bradenton InternationalAirport 6000 AirportCircle Sarasota, FL 34243 Dear Mr. Piccolo: Visit Sarasota Countygives its strong support for your application for the Small Community Air Service Development Program grant for Continental/ United direct service into SRQ. With a unanimous vote of approval from the Sarasota County Tourist Development Council, the Sarasota Convention & Visitors Bureau would provide a financial match for thisgrant in the amount of $50,000 annuallyfor twoyears. We thank you for taking the initiative to apply for this grant to restore much needed direct air service for our community and for its economy. Sincerely,
Virginia J. Haley, CDME President

# -~:-

# ...

# -. BradentonArea Convention and VisitorsBureau

June 1,2012
Mr. Rick Piccolo, Director Sarasota Bradenton lnt'l.Airport 6000AirportCircle Sarasota, FL 34243-2105 DearRick: 

### BACVB.com

The BradentonArea Convention &Visitors Bureau (BACVB} stronglysupportsyourapplicationforthe Small CommunityAirService Development Program grantforan additional UnitedAirlines non-stop service intoSRQ. Duringoneofourprevious meetings,the ManateeCountyTourist DevelopmentCouncil has already made arecommendationtothe Board ofCountyCommissionerstopledge$50,000annuallyfor2years as matchingdollarsforthisgrantapplication. IfSRQ receivesthegrant,the BACVB willquicklymove forwardtotheCountyCommissionersforapprovalofthematchingdollars.
Wethankyoufortakingthe initiativetoapplyforthisgrant. Pleasefeelfreetocontact me ifyou have anyquestionsandthe bestofluckwithyourgrantapplication.
Best regards,

Elliott Falcione Executive Director EF/mll

A DepartmentofManateeCountyGovernment BRADENTONAREA CONVENTION&VISITORS BUREAU ONE HASEN BOULEVARD. PALMETTO, FL 34221