# Proposal under the Small

Community Air Service Development Program Docket DOT-OST-2011-0119

8/27/201

0

The

The Port Authority of New York & New Port Authority of New York & New
Jersey 225 Park Avenue 225 Park Avenue

South New York, NY 10003 New York, NY 10003 P h o n e: 212- 435 - 7000 W e b s it e: panynj.gov panynj.gov panynj.govSMALL COMMUNITY AIR SERVICE DEVELOPMENT

PROGRAM DOCKET DOT-OST-2011-0119

SUMMARY
I NFORMATION

All applicants must submit this information with their proposal, along with a completed form

SF424 on http://www.grants.gov.

A. APPLICANT INFORMATION: (CHECK ALL THAT APPLY)



### ☒ Not a Consortium 

# □ Interstate Consortium 

# □ Intrastate Consortium



# □ Community now receives EAS subsidy



### ☒ Community (or Consortium member) previously received a Small Community Grant

If previous recipient: Date of grant: 2005 Expiration date of grant: Closed

B. PUBLIC/PRIVATE PARTNERSHIPS: (LIST ORGANIZATION NAMES)

PUBLIC PRIVATE

1. The Port Authority of New York & New Jersey 1. Central Hudson Energy Group

2. 2. Orange County Industrial Development Agency

3. 3.

4. 4.

5. 5.



## c. PROJECT P R O P O S AL : (CHECK ALL THAT APPLY)


### ☒ 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 (explain bel 

### ow)4



### D. EXISTING LANDING AIDS AT LOCAL AIRPORT:



## ☒ Full ILS 

## ☒ Outer/Middle Marker 

## ☒ Published Instrument Approach


## ☒ Localizer 

## ☒ Other (specify) GPS, VOR. NDB

E. PROJECT COST: DO NOT ENTER TEXT IN SHADED AREA



### LINE DESCRIPTION SUB TOTAL TOTAL AMOUNT
1 Federal amount requested 450,000


### 2 State cash financial contribution
---


### Local cash financial contribution

3a Airport cash funds 20 0,000


### 3b Non-airport cash funds 175,000



### 3 Total local cash funds ( 3a+3b ) 375 ,000 

### 4 TOTAL CASH FUNDING ( 1+2+3 ) 825 ,000


### In-Kind contribution

5a Airport In

- Kind contribution**

Terminal Fee Waivers 383

, 250



### 5b Other In-Kind contribution**

--------



### 5 TOTAL IN-KIND CONTRIBUTION

( 7a + 7b ) 383,250



### 6 TOTAL PROJECT COST ( 4+8 ) 1, 20 8,250



### F. IN-KIND CONTRIBUTIONS**

For funds in lines 7a (Airport In-Kind contribution ) and 7b (Other In-Kind contribution),

please describe the source(s) of fund(s) for each.

Terminal Fee Waivers-Airport-$383,250

F. IS THIS APPLICATION SUBJECT TO REVIEW BY STATE UND ER EXECUTIVE ORDER 12372

PROCESS?



# □ a. This application was made available to the State under the Executive Order 123725 

### Process for review on (date) _______________.



# □ b. Program is subject to E.O. 12372, but has not be en selected by the State for review.


## ☒ c. Program is not covered by E.O. 12372.

G. IS THE APPLICANT DELINQUENT ON ANY FEDERAL DEBT? (IF "YES", P ROVIDE

EXPLANATION )



## ☒ No 

# □ Yes (explain)6

Table of Contents

SECTION 1. Existing Air Service 6

SECTION 2. Synopsis of Community’s Historical Servi ce 8

SECTION 3. Description of Air Service Development E fforts Over Past 5 Years 9

SECTION 4. Description of Air Service Needs or Defi ciencies 11

SECTION 5. Strategic Plan for Meeting Air Service N eeds under the Small Community

Air Service Program 11

SECTION 6. Public – Private Partnership 14

SECTION 7. Project Funding 15

SECTION 8. Explanation of Monitoring the Funding 15

SECTION 9. Grant Project Monitoring 15

SECTION 10. Project Sustainability 16

SECTION 11. Legal Sponsor 167



## SECTION 1 – EXISTING AIR SERVICE Stewart International Airport (SWF) serves an area within a roughly fifty-mile radius of the city of Newburgh, NY. The catchment area includes almost al l of Orange, Rockland, Putnam, Dutchess and Ulster counties in NY plus Pike County, PA and Suss ex County, NJ plus most of Sullivan and Wayne counties in PA and Passaic County, NJ. The area a little less than one-quarter of Fairfield and Litchfield counties in CT and Bergen County, NJ. Wi th small shares of New Haven County, CT, Morris County, NJ, Columbia County, NY and Lackawanna Coun ty, PA. Access roads throughout the Region to the airport are excellent including two intersta te highways. Figure 1 illustrates this point.

Figure 1 – Stewart International Airport Catchment Area

Stewart International Airport is currently served b y Delta, US Airways and JetBlue airlines. Each of these airlines provides service to its respective h ubs or focus cities. Table 1 provides details for
each airline. SWF

EWR JF K BDL

LGA HPN

Congested Roadway Traffic Area SWF Catchment Area

Interstate 84 & NYS Thruway (I

- 87)

New Interstate (84)
C onnection8

Table 1. SWF Airlines and Flights per Week



### Non- Stop

Destination Destination Coding Carrier

Coding Carrier Operating

Carrier Carrier Equipment

Type Flights per

Week

Philadelphia US Airways US Airways

Express Regional Jet 28

Detroit Delta Delta

Connection Regional Jet 20

Atlanta Delta Delta

Connection Regional Jet 14

Orlando JetBlue JetBlue Airbus / RJ 14



### Ft

Lauderdale JetBlue JetBlue Airbus 7

Total 83

Most of the service to Stewart International Airpor t (SWF) is provided by regional jets (83%) with the remainder provided by larger jet aircraft. SWF is one of eight primary commercial service airports that serve the SWF Service Area. While SW F is the closest airport for passengers in the service area, its lack of nonstop service choices a nd the abundance of service choices available at other local airports causes more passengers to use other airports in the area instead of SWF. For the 1.0 million domestic passengers in the market a rea, the preferred airports from the SWF Service Area are SWF with 32%, EWR with 26%, JFK with 13% a nd LGA with 11%. SWF is the airport of choice for SWF Area passengers because it is the cl osest airport for many passengers in the catchment area and it had service to popular Florid a destinations in the year ended June 2008. Due to this, many passengers (68%) that could use SWF o riginate their flight at a different airport.

Table 2. Top Destinations for the Stewart Area

SWF has been fortunate that over the course of its history many of the major US carriers have provided service. However, due to changes in business focus and initiatives, airlines such as American and United no longer serve the community. Additionally, except for seasonal Cancun service by Allegiant, no new carriers have initiated air service from SWF since Skybus in 2008. (Skybus ceased operations due to bankruptcy.) 

### Rank Market Passengers 1 Orlando (MCO) 183,948 2 Fort Lauderdale (FLL) 76,530 3 Las Vegas (LAS) 50,129 4 West Palm Beach (PBI) 46,390 5 Tampa (TPA) 36,788 6 Atlanta (ATL) 35,724 7 Chicago (ORD) 35,607 8 Los Angeles (LAX) 21,481 9 San Francisco (SFO) 21,304 10 San Juan (SJU) 21,171
529,072 TotalFigure 2

Figure 3 As Figure 2 illustrates, the dis ta and other airports within t h passenger traffic to flow easily airports to take advantage of lo historically exists.



## SECTION 2. SYNOPSIS O
COMMUNITY’S HISTOR I Service levels at SWF have been changing dramatically over the past several years with the entrance and exit of AirTran and Skybus the exit of American Eagle; JetBlue and Delta Connection with Northwest; and other minor schedule changes these carriers and US Airways have implemented along the way. Figure
the decline in air service since seen, average daily flights ha ve per day to 12 and the number
decreased 5 to 3.

8 ta nce between SWF

h e region allows

to those alternate

lo wer pricing that



## O F
I CAL SERVICE Service levels at SWF have been changing dramatically over the past several years with the entrance and exit of AirTran and Skybus ; the entrance of and their merger
other minor schedule US Airways have Figure 3 illustrates

since 2008. As can be

ve shrunk from 20

number of carriers hasFigure 4- Market Share

Figure 4 illustrates the current market JetBlue, controls over 43% of the

Figure 5. SWF Monthly Enpla nemen



## SECTION 3. AIR SERVICE D
Over the past four years, the Authority importantly, retain air service in adoption, visits with service provider advertising campaigns , internet survey, into the airport that wo uld reduce following summary: • O&D passengers peaked in YE 1Q’08 at 938,540 (1,286 PDEWs)

• During this period, SWF also had AirTran

American Eagle market share among carriers at SWF. Note that a
the passenger traffic at SWF.

nemen ts – 12 Month moving Average



## D EVELOPMENT EFFORTS OVER THE P AST

Authority

has been proactive in its efforts to attract,

service in the Stewart market. These efforts include: i ncentive provider s, cost reduction programs, charter , internet survey, terminal survey and the introduction of share

uld reduce our airline cost per enplaned passenger. Each 938,540

O&D passengers peaked in YE 1Q’08 at 938,540 (1,286 PDEWs)

During this period, SWF also had

- ATL/FLL/MCO/PBI/TPA; American Eagle

- ORD; JetBlue

- PBI

9 single carrier,



## AST 4 YEARS

attract, and just as

ncentive program flight programs,

share d-use systems

Each is explained in 394,05010

Incentive Program – An air service incentive progra m was adopted by the airport to encourage airlines to increase passenger service at Stewart I nternational airport. The program provides a oneyear incentive package to any carrier or charter to ur operator providing scheduled non-stop passenger service to a new destination from Stewart . Incentives include ground-handling cost offsets and marketing support.

Allegiant has taken advantage of this incentive wit h the advent of Cancun service from SWF during this past winter season. It is this type of ongoing cost reduction that SWF is hoping to implement through the shared use passenger processing system. Cost per enplanement will reflect the reductions realized through the implementation of t he shared use option. It is this ongoing cost reduction, along with the removal of potential barr iers to entry that SWF believes will lead to greater consideration of the Stewart market.

Communications with Airlines – Contacts with airlin es are pursued via a number of avenues. Phone calls or emails are the most common, happening cont inuously, but face-to-face meetings are the most effective. These meetings take place during tw o distinct venues, one on one, or during conferences. SWF is very active in this arena, atte nding conferences sponsored by ACI-NA, AAAE, and others convened by industry associations.

Charter Flights – SWF has been active in pursuing c harters to satisfy local demand to markets that are currently un-served. As noted above, during thi s past winter season, SWF initiated a charter program aimed at providing weekly flights to Cancun for the winter break period. The program was well received by the travel agency community, as th e contracted pricing for non-stop SWF-CUNSWF was attractive.

Advertising Program- Over the past 4 years, SWF all ocated approximately $750,000 to implement advertising programs aimed at promoting the benefit s of using SWF. The campaigns have raised the visibility of the airport. Utilizing most areas of media; television, radio, print and web, the messag e is consistent in the need to support SWF.

Business Travel Surveys – In 2010, the Airport, in partnership with the Orange and Dutchess County Chambers of Commerce initiated and internet survey to identify the travel patterns of business travelers in the region as well as identifying thei r existing views and perceptions of Stewart International Airport. The information compiled is being used to develop strategic marketing plans that will support efforts to overcome some of the p erceptions that area travelers have about the airport.

Passenger Surveys –Stewart International Airport st aff will be conducting surveys of departing and arriving passengers to determine their perceptions of the airport, the decision making process to use SWF, their use of airport facilities as well as demographic information. This program is scheduled for implementation beginning in August 20 11.11



## SECTION 4. DESCRIPTION OF AIR SERVICE NEEDS OR DEFI CIENCIES

Reaching out to our users (and non-users) through s urveys and engaging in the community has assisted us in identifying our air service needs an d deficiencies. The best way to explain this is by categorizing the needs into needs of market and cos t.

First is to look at the market needs of the Stewart traveler. Of the top demanded markets, SWF currently does not offer service to Chicago and the West Coast. Additionally, with more than 43% of the traffic at SWF being controlled by JetBlue, and 37% by Delta, competition is needed.

Second is cost. One of the biggest concerns heard f rom users and non-users is the need to reduce

airfares in the market. Statistics bear out these c oncerns as legitimate. The proximity of other NY area airports, with lower average fares makes those alternate airports more attractive. Both business and leisure travelers use alternate airpor ts due to this disparity in pricing. In order to combat the leakage that is occurring in the SWF mar ket, the Port Authority of NY & NJ (PANYNJ) continually pursues air carriers to provide new des tinations.



## SECTION 5. STRATEGIC PLAN FOR MEETING AIR SERVICE N EEDS UNDER THE

SMALL COMMUNITY AIR SERVICE PROGRAM

The Port Authority of NY & NJ plans on using the Gr ant to implement further the shared use platform that has recently been installed in the Te rminal; assist existing and entrant carriers in establishing new destinations by providing an opera ting cost offset; and provide marketing support

toward the establishment of new destination service . This platform can be used by all existing air carriers as well as be used as an attractant for po tential air carriers that would like to enter the

market but are reluctant to do so because of barrie rs to entry. The information within this section outlines our case for why this project is needed, a n outline for what would take place, and a timeline for how we intend to accomplish our goal.

Historically, SWF received a SCASD Grant in 2005 fo r the marketing of airline service. At the time, SWF had lost 34% of its capacity with the loss of S outheast Airlines, which served Ft. Lauderdale, Orlando and St. Petersburg in Florida. In seeking t o replace this capacity, the Airport held numerous meetings with JetBlue Airways. To bolste r the Airport’s commitment to JetBlue and ensure self- sustaining service, SWF developed a $500,000 marketing plan to promote potential new service to Florida or other destinati ons and enhance overall awareness of the airport and its service offerings to the Hudson Valley an d Northern New York suburbs. A partnership comprising the Airport, Orange County Industrial De velopment Agency (IDA) and Clear Channel Communications offered $200,000 worth of marketing support and $50,000 of exclusive space

rental waivers for the first 6 months of service. The DOT was asked to help fund the remaining $250,000 through this grant program. As a result of these efforts, JetBlue currently serves Ft Lauderdale and Orlando, Florida.

Today, the challenge facing SWF is how to increase passenger and flight activity while reducing the cost associated with doing business at SWF. Utilizi ng commonly structured pricing practices, increases the number of passengers and flights, and consequently lowers the cost of per passenger handling. Today airports are no longer just lessors , they are active service providers. However, the current practice of depending on increased flight a nd passenger activity to lower per passenger12

costs do not take into consideration this fundament al change. Addressing this challenge becomes paramount as the economics surrounding this shift d ictate radical changes in service levels. The airlines’ view of cost is no longer the number of s quare feet leased but the number of shoes.

Airlines want to pay for only those items that they themselves use and only for as often as they use them. Additionally, they look to serve those airpor ts that reduce barriers to entry and provide turnkey opportunities. In a large degree, there is no need for anything other than a runway, security and a means to identify who should be onboard. A pa ssenger may need someone to help with a bag, otherwise airline personnel costs start with the ai rcraft door. The ability to provide for such a scenario becomes more evident, particularly in ligh t of recent and proposed mergers.

Understanding these issues has led to the conclusio n that SWF should implement access to a shared use check-in and passenger processing capability fo r the airlines, both current and future. The implementation of such a system will ultimately lea d to measurable cost reductions and facility efficiency. Shared use allows for infrastructure fl exibility for airline co-location, and cross utilization of gates, allowing for expansion when n ecessary and contraction when needed. Having this flexibility will provide the cost savings need ed to allow markets such as SWF to be more economically feasible, particularly during periods of reduced demand. In addition, having a flexible system that allows for increases could offset the n eed for the physical expansion of an airport, thereby significantly reducing future costs.

Shared-use facilities provide savings to both airpo rts and airline collaborates and allows the airport operator to use existing space more efficiently, th us increasing airport capacity without necessarily constructing new gates, concourses, terminals, or c heck-in counters. It is anticipated that a grant would be used to purchase shared-use terminal equip ment and/or shared-use passenger processing equipment.

A shared use system at SWF will allow for the accom modation of an increase in flights, reduce an airlines risk during start up, eliminate costs for new construction to accommodate growth, and increase flexibility. As envisioned the shared-use system as implemented would provide the following to all airlines, both existing and new en trants:

1. Modular design and flexibility for easy expansion/c ontraction of the system without degradation to the system’s performance.

2. Allow multiple airlines to share ticket counter pos itions and departure podiums. This would be done by providing stable and secure application acc ess to each airline’s respective host system. The shared-use workstation screen and keyboard user interfaces would be functionally identical to each airline’s self- deployed propriet ary passenger processing system.

3. Include a resource management system to facilitate flexible allocation and management of ticket counters, gates and baggage facilities.

4. Integrate with the Airport’s existing flight inform ation display system.

5. Provide a reliable, stable and secure environment f or airline operations.13

6. Adhere to open standards system architecture.

7. Use, to the extent possible, commercial off-the-she lf systems and incorporate systems and technologies that have been developed and successfu lly implemented at other airports.

New Destination Service Offset – The second program supported by this Grant is in regard the established incentive program for the Airport. Moni es within the context of this program would be

used to offset the cost to establish new destinatio n service by existing or new entrant carriers. All elements of this program are metered pursuant to ap plicable FAA guidelines.

Marketing Support – This initiative is designed to support service to new destinations by matching advertising dollars to airline service levels. The best way to ensure the success of new service is by attracting passengers. This program is designed to increase the advertising reach particularly critical during the early days of new service start up.

Phases of Implementation for SWF Shared Use System

Upon acceptance of the grant, the Port Authority wo uld be prepared to begin work on design and development. We anticipate a 6-month project comple tion. Listed below is the implementation plan and timetable that the Airport would use. The Airpo rt would break the project into four phases: a Planning phase, a Design and Installation phase, an Implementation phase, and finally a PostImplementation Phase.

Planning Phase

During this phase, the airport will establish the a ppropriate benchmarks that will be used to measure the success of the project. Probable benchm arks at this point could be – cost per enplaned passenger, terminal cost per enplaned passenger, an d airline cost per square footage. It is the assumption of the Airport that reducing the other b enchmarks as listed above would provide the impetus for future growth at the airport.

Design & Installation Phase

1. The Design and Installation of the shared use platf orm will be phased as necessary in order to minimize any disruption of normal Airport or Airlin e operations. Upon receipt of the grant, the Airport would pursue steps to acquire a system that meets the needs outlined in this proposal. Upon selection of the vendor, the contractor will b e required to provide a detailed installationphasing plan for acceptance by the Airport prior to performing any work. We anticipate that this process would take approximately 90-120 days.

2. The initial phase of Design and Installation will i nclude the development of the final design and installation schedule; the development and finaliza tion of all interface design documents for the system; the submittal of equipment and component do cuments; and coordination workshops or meetings with Airport and airline staff.

3. The next phase of the process will be the installat ion of the counter, gate and all other shareduse components and connections required.14

Implementation Phase

The Implementation phase would have some overlap wi th the final phase of Installation and will consist of the execution of performance verificatio n testing, endurance testing, training, and final project closeout. This would take about 30-days.

Post-Implementation

This portion would be ongoing as we contend that th e implementation of the shared-use system would provide the impetus for further market develo pment. We would continue to monitor and track the metrics and performance measures outlined above to determine whether we are meeting our goal of reducing airport costs to the airline w ith the intent of attracting more air service.



## SECTION 6. PUBLIC-PRIVATE PARTNERSHIP

The Port Authority has a leading role within the co mmunity - an important partner in this grant.
Continued involvement with its customers is the mai n contributor to the overall success of the region.

The Orange County Industrial Development Agency (ID A) promotes economic development through a program of incentive - based allocations that assist in the construction, equipping and maintenance of specific types of projects and facil ities. The IDA works to advance the health, prosperity and economic welfare of citizens by reta ining and creating jobs and attracting new business. The IDA has assisted numerous companies a nd not-for-profit organizations with new business and capital expansions. As a direct result of the assistance provided by the IDA, companies have become more competitive by locating or expandi ng their facilities within Orange County, New York. The IDA recognizes the benefit of having an a irport in the community that provides access to the country’s air service system.

Central Hudson Energy Group has a long-standing tra dition of good corporate citizenship and a strong commitment to environmental health and safet y. The company and its employees work continually to improve the quality of life in the c ommunities where they do business. Their Code of

Business Conduct and Ethics sets forth the commitme nt of CH Energy Group to conduct business with its customers in accordance with the highest e thical standards and all applicable laws, rules and regulations. Central Hudson promotes economic d evelopment programs in the region around Stewart by offering incentives to businesses that c reate quality, sustainable jobs. Central Hudson supports the Airport in its contribution of creatin g jobs and economically supporting the community.15



## SECTION 7. PROJECT FUNDING

Listed below are the anticipated project needs and anticipated costs.

The Airport’s $150,000 cash share is included in th e Port Authority’s budget for the Air Service Development Incentive Program described in Section 3.



## SECTION 8. EXPLANATION OF MONITORING THE FUNDING
The Airport proposes an initial investment of $450, 000 toward the programs discussed in this request. To ensure that the anticipated amount goes toward this program the airport will track all efforts spent toward the program in a separate syst em and provide this detailed information with the program report.



## SECTION 9. GRANT PROJECT MONITORING

Upon the successful funding of this request, the Po rt Authority of NY & NJ will be responsible for the administration of this program. The key milestones on the project come at the following stages:

1. Development of benchmarks for measurement of progre ss. Appropriate benchmarks will be used to measure the effectiveness of this program.

2. Planning, Design and Installation of the Shared Use System. The planning, design and installation of the shared use system would follow established processes and would measure progress using those same metrics and reporting pro cedures.

3. New Destination Service Offset - Tracking this prog ram will parallel management of the Airport’s air service incentive program described i n Section 3. All controls required to administer this program will align with FAA require d parameters. This element of the Grant is

not utilized unless a carrier announces new service

.

4. Marketing Support – In line with the above referenc ed incentive program, this element of the grant is also contingent upon a carrier announcing new service. All efforts are tracked pursuant to the airport programs requirements, and again, match FAA required parameters. Project Initiative Federal Share Airport Share Local Contribution Total Shared-Use System 300,000 $ 50,000

$ 100,000

$ 450,000

$ Airline Operational
Offset 383,250 $ 383,250 $

New Destination Marketing Support 150,000 $ 150,000

$ 75,000

$ 375,000

$

Total 450,000

$ 583,250

$ 175,000

$ 1,208,250

$16



## SECTION 10. PROJECT SUSTAINABILITY

The implementation of the shared use platform at SW F will further transition from an atmosphere of operational constraints into an environment that provides flexibility and accessibility and

removes barriers of time and cost. It is this trans itional shift that provides the basis for the ongoi ng sustainability of the program, as the project imple mentation costs will ultimately lead to reduced long-term cost.

Shared-use terminal equipment is not a one-time att empt at gaining additional air service. It is the future of the airport-airline interface with the pa ssenger and SWF. It is this attempt to reduce airline terminal operating costs that we believe wi ll help to reduce the fare disparity that prevents us from retaining more of our passengers.

The elements of Operating Offsets and Marketing Sup port provide for a sustainable environment for additional flights and enplanements at SWF. We are confident that the project will provide benefit to the traveling passenger by reducing oper ating costs to the airlines and improving accessibility.



## SECTION 11. LEGAL SPONSOR

The Port Authority of NY & NJ will be the legal spo nsor and administrator of this program. The Port Authority of NY and NJ is a municipal corporate ins trumentality and political subdivision of the States of New York and New Jersey, created by Compa ct on April 30, 1921, with the consent of the Congress of the United States.