## Application Under The



# Small Community Air Service Development Grant Program

DOCKET OST-2010-0124

DUNS # 169182466 Congressional District # ME 02Small Community Air Service Development Grant 2

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## Table of Contents

EXECUTIVE SUMMARY .................................

................................................... ....................... 3

THE AIR SERVICE DEFICIENCY ........................

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

**A G**  **RANT W**  **ILL A**  **SSIST I**  **N A**  **DDRESSING T**  **HESE D**  **EFICIENCIES**

**.................................................. ... 6**  **T HIS**  **G RANT**  **W ILL**  **R E**  **-O PEN**  **A CCESS**  **F OR**  **B ANGOR** 

**................................................... ................. 6** 

THE BANGOR MARKET .................................

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

**A REA OF**  **A IR**  **S ERVICE**  **I NFLUENCE** 

**.................................................. ........................................... 8**  **B ANGOR**  **A IR**  **S ERVICE** 

**.................................................. ...................................................**  **......... 9 M**  **AJOR D**  **EFICIENCIES IN C**  **APACITY &**  **I N**  **N ETWORK**  **A CCESS** 

**.................................................. .....11**  **L ACK OF**  **C APACITY**  **I S**  **T HE**  **#1 D**  **EFICIENCY**

**.................................................. ..............................12**  **L ACK OF**  **C APACITY**  **C REATES**  **T HE**  **#2 D**  **EFICIENCY**

**– H**  **IGH F**  **ARES ...............................................13**  **C APACITY**  **T RENDS** 

**– F**  **ALLING C**  **ONSISTENTLY**

**.................................................. .........................14**  **P ASSENGER**  **T RENDS**  **M IRROR**  **T HE**  **L OST**  **C APACITY** 

**.................................................. ................15**  **T HE**  **E CONOMIC**  **D AMAGE**  **I S**  **R EAL**  **& D**  **EMONSTRABLE**

**.................................................. ..............16** 

GRANT OBJECTIVE: ADDITIONAL HUB ACCESS ............

................................................... .18

**U NITED**  **A IRLINES** 

**– ORD**  **OR IAD ...............................................**  **..............................................18 R**  **OUTE P**  **RO F**  **ORMA**

**– C**  **HICAGO /O’H**  **ARE**

**.................................................. ................................19**  **R OUTE**  **P RO**  **-F ORMA** 

**– W**  **ASHINGTON D**  **ULLES**

**.................................................. ..........................20** 

PROPOSED GRANT STRUCTURE ..........................

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

**C OMPREHENSIVE**  **M ARKETING**  **P ROGRAM** 

**.................................................. ................................22**  **P ROGRAM**  **A DMINISTRATION** 

**.................................................. ...................................................**  **22 P**  **ROGRESS R**  **EPORTS TO DOT ...............................................**  **..................................................2 2**  **P OST**  **-G RANT**  **M ARKETING**  **S UPPORT** 

**................................................... ......................................22**  **P ROPOSED**  **G RANT**  **F UND**  **A LLOCATION** 

**.................................................. ...................................23**  **B ANGOR**  **P RIOR**  **A IR**  **S ERVICE**  **D EVELOPMENT**  **E FFORTS** 

**.................................................. ...........24** 

SUMMARY ...........................................

................................................... .................................25

APPENDIX B ........................................

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

LETTERS OF SUPPORT ................................

................................................... ......................30Small Community Air Service Development Grant 3

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## Executive Summary

Official Proposer

**City of Bangor, Maine Bangor International Airport** 

DUNS # 169182466

**Contact: Ms. Rebecca Hupp Director** 

**City of Bangor Bangor International Airport**  **287 Godfrey Boulevard Bangor, ME 04401** 

**Bangor International Airport is the main air gatewa y for central, eastern**  **and northern Maine, and is a major waypoint for int ernational flights**  **between North America and Europe.**

Local Community Support Organization

**This proposal is supported by a community consortiu m including the City**  **of Bangor, the State of Maine, the Bangor Region Ch amber of**  **Commerce, EMDC/Mobilize Maine, and the Bangor Regio nal**  **Development Alliance.**

Official Sponsor

**The City of Bangor, Bangor International Airport is the official sponsor of**  **this application.**

Synopsis of Grant Request

**Bangor International Airport and the community are requesting a grant in**  **the amount of $500,000, with a 50% community match , for a total**  **program fund of $750,000.**

**This will be used to alleviate a major air service deficiency represented by**  **a lack of access to gateway connecting hubs. The gr ant will be targeted**  **at specific hubs that offer such connectivity and a re compatible and**  **additive to existing incumbent service.**

Airline Targets

**The Airport has identified key target carriers, and in this grant request is**  **focused on United Airlines.**Small Community Air Service Development Grant 4

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **However, due to uncertainties in the airline indust ry, (for example, the**  **outcome of the United merger with Continental) it i s understood that there**  **are a range of factors that could materially change a carrier’s strategies in**  **the months ahead.**

**For this reason, the Airport has also identified al ternative carriers that**  **offer similar connectivity. In this regard, in the event that a satisfactory**  **agreement cannot be attained with United, or that c arrier finds itself**  **unable to participate, the Airport would reserve th e right to alternatively**  **approach American Airlines for access to its Chicag o/O’Hare hub, or US**  **Airways for access to its Charlotte hub.**

Proposed Application of Funds

**The grant and the community match will be allocated into two**  **applications. The primary applications will be for a carefully-defined**  **revenue guarantee that would be accessed only if pre-agreed revenue**  **targets are not achieved. The second application wi ll be focused on a**  **targeted marketing and public awareness program to support the new**  **service.**

Marketing &
Promotional Support Airline

Revenue Guarantee Total



## Community **$83,333 $166,667 $250,000** 

## US DOT **$166,667 $333,333 $500,000**



### TOTAL $250,000 $500,000 $750,000Small Community Air Service Development Grant 5

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## The Air Service Deficiency

**Bangor International Airport (BGR) has experienced significantly higher**  **air fares and substantial traffic leakage over the past five years. The**  **reason is that changes in the airline industry have caused capacity cuts,**  **even in the face of strong traffic and revenues for incumbent carriers.** 

**The Airport has a clear plan to address this situat ion, but it requires the**  **assistance of a grant under the Small Community Air Service**  **Development Program.**

**Despite a strong economy, air service levels have d eclined at Bangor**  **over the past five years, as have the levels of acc ess to the national and**  **global air transportation system. Three years ago, Bangor was served by**  **five major airline systems, accessing five major co nnecting hub gateways.**  **Today, it has access to just two major carrier syst ems, and two true**  **connecting hubs. 1** 

• **Continental dropped service to its hub at Newark, despite load**  **factors exceeding 84%. The congestion and delays at tendant to**  **the New York metro area made the service difficult for the carrier**  **to support.**

• **Delta has deleted service to Cincinnati/Northern K entucky**  **International Airport, due to that carrier reducing operations at**  **CVG.**

• **American/American Eagle retired the majority of it s 37-seat ERJ**  **135 fleet. This eliminated not only AA branded serv ice to**  **LaGuardia and Boston, but also it resulted in closu re of a**  **maintenance facility at Bangor International.**

• **Delta found it necessary to re-allocate New York c apacity, moving**  **its BGR-JFK service to LGA. This effectively cut of f BGR from the**  **international connectivity of the Delta hub at that airport, not to**  **mention substantial domestic connections as well.**

**None of these events are related to the economy or the traffic generation**  **within the Bangor area of service influence. As wil l be noted in this**  **document, ridership today at BGR is exceedingly str ong, with load factors**  **in excess of 81%. It is a matter of changes in the airline industry affecting**  **Bangor, and resulting in declining flights and risi ng fares.** 

**1 These were CO/ERW, DL/CVG, NW/DTW, DL/ATL and US/P**  **HL. It was also served seasonally from NW/MSP. These were in addition to AA service to bot**  **h BOS and LGA, which are not structured by that carrier as connecting hubs,**  per se **, but where over half the traffic was flowing to an d from other**  **AA flights. Today, Bangor has only service to hubs at DL/DTW, and US/PHL. US Airways operates**  **flights to both DCA and LGA, but these offer limite d access to other on-line destinations.**  

### The Grant Will **Address A Growing Shortfall**  **In Seat Capacity At Bangor** 

Bangor International Airport serves a vibrant market. But changes in the airline industry, as well as creeping fare levels have resulted in enormous leakage.Small Community Air Service Development Grant 6

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### A Grant Will Assist In Addressing These Deficiencie s

**The Airport has an active and aggressive air servic e development**  **program. It has identified key service shortfalls, which, if filled, will**  **substantially reverse the decline in traffic that B angor has experienced**  **over the last several years.**

**There are a number of air service deficiencies that Bangor is working to**  **address. The most pressing, however, is gaining add itional capacity**  **through major airline systems’ connecting hubs. The current Delta service**  **to Detroit, and the current US Airways service to P hiladelphia are**  **experiencing exceptionally high load factors. This represents an**  **opportunity for Bangor to explore service to other carriers’ gateways.** 

**But in an industry that is not expanding fleets, ai rline planning**  **departments will not just move airplane time to Ban gor unless two criteria** 
**are met:**

**1. There must be demonstrable net-new system revenu e for the**  **carrier;**

**2. There must be minimal risk – i.e., the risk of m oving aircraft from**  **another market into service at BGR must be offset.**

**Bangor has hard and accurate data to satisfy the fi rst requirement. This**  **grant application is crafted to meet the second cri teria.** 



### This Grant Will Re-Open Access For Bangor

**In this application, the community is requesting a grant in the amount of**  **$500,000, which will be matched by local funding in the amount of**  **$250,000. Of this total of $750,000 a fund of $250, 000 would be allocated**  **to carefully-designed marketing and public awarenes s programs to**  **assure success of the new service**

**The remaining dollars will be applied as a revenue guarantee, based on**  **clearly-defined goals, to offset the carrier’s risk in the first year of service.** 

**The Airport has identified two prime airline hub ta rgets for this grant.** 

**United/Chicago-O’Hare**

**.**
**The Airport has had very encouraging discussions wi th United Airlines**  **regarding implementation of service between Bangor and**  **Chicago/O’Hare. The airline has noted the success o f the current Delta**  **service at Bangor, which runs at an 85% load factor and provides**  **substantial system feed to Delta. United believes i t can gain similar traffic**  **with service to its hub at O’Hare. With the new add itional runway at ORD,**  **United can again contemplate adding additional capa city.**  

### Bottom Line **Objective: Addressing An**  **Access Deficiency**

The community has identified a severe and increasing deficiency in air service accessibility to Bangor.

The grant requestfocuses on riskabatement targeting carriers that will open BGR up to additional capacity and competition.

The dollars would be available as a revenue risk guarantee, not as a subsidy.

However, based on the data and projections accomplished by the Airport, it is felt that the risk to the DOT’s grant dollars is low.Small Community Air Service Development Grant 7

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **It is noted that American may also be a target for this service, as it also**  **has a very large connecting operation at O’Hare.**

**United/Washington-Dulles**

**United has also indicated interest in service to Ba ngor from its global hub**  **at Washington Dulles International Airport. Like OR D, this satisfies the**  **objective of the grant application by providing nat ionwide service**  **connectivity. Like Chicago/ORD, IAD also offers sub stantial international**  **connectivity.**

**Bangor does not have year round service to Washingt on, which is a major**  **O&D point, and this service would also address this deficiency.** 

**At this time, United is in the process of merging w ith Continental Airlines.**  **This injects some uncertainty to its future hub str ategies. For this reason,**  **Bangor was encouraged to review potential for both ORD and IAD at**  **United.**

**Other Options**

**The Airport and the Department are aware that condi tions change rapidly**  **in the airline industry. While initial discussions with United Airlines have**  **been encouraging, there are many events that could take place in the**  **coming months to alter that airline’s market strate gies.** 

**Therefore, as a back-up, the Airport has identified two fall-back targets for**  **the grant, both of which would satisfy the objectiv es of this grant**  **application, which are to open up additional connec tivity and serve to**  **bring additional fare discipline to the Bangor mark et. The first is**  **American/O’Hare – which is very similar in structur e to the United**  **operation at that airport. The next alternative is US Airways’ hub at**  **Charlotte. This facility offers strong connectivity to the South and West.** 

**It is expressly noted that these alternatives are i dentified due to the**  **unsettled nature of the airline business and they b oth meet the criteria for**  **Bangor – which is to restore and rebuild hub access**

**.**Small Community Air Service Development Grant 8

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## The Bangor Market

Area of Air Service Influence

**Studies accomplished by the Airport indicate that B GR serves as the air**  **transportation gateway for consumers over a very wi de region of northern**  **Maine, plus parts of New Brunswick and Quebec.**

**The population base – not including the Canadian pr ovinces – represent**  **over 413,000.**

**County Population Avg Household Income Median Disposab le Income**  Aroostook 73,075 $42,029 $30,446 Hancock 51,046 $56,002 $37,899 Kennebec 25,560 $56,564 $34,544 Penobscot 148,136 $54,096 $35,982 Piscataquis 17,659 $40,368 $29,846 Somerset 34,958 $44,693 $31,446 Waldo 29,356 $50,087 $34,910 Washington 33,378 $39,033 $27,433 **Totals 413,168 $49,466 $33,738**

**The economy in this region remains strong, as demon strated by**  **substantial average household income and disposable dollars.**  

### Air Service **Deficiencies Translate Into**  **Severe Negative Economic Impact** 

A population of over 413,000 depend on Bangor International as the gateway to and from the region.Small Community Air Service Development Grant 9

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Bangor Air Service

**Today, Bangor has service from two major airline sy stems, plus day-of**  **the-week Allegiant flights to two leisure destinati ons in Florida.** 

**The above represents the service offered as of Augu st, 2010. Below is**  **the service offered in the same month just three ye ars ago. Capacity is**  **down by over 18%, representing over 108,000 fewer s eats. This is a**  **growing air service deficiency which the grant will help address.** 

**Source:**

**The service to MSP was offered seasonally on week-e nds. With the re**  **organization of Northwest into Delta, this has not been restored. All of**  **these hub-feed markets were highly successful, with strong load factors.**  

### Access To Bangor **Has Been Severely Reduced** 

From access to five major airline connecting hubs just three years ago, Bangor now only has two true connecting hubs for national and global access.

LGA and DCA service is mostly O&D, as US Airways does not bank flights at those airports to facilitate connections.

Allegiant service is outstanding, but it is focused entirely on generating net-new leisure traffic by offering high-value, low-cost vacation packages to Florida, and not filling existing air travel demand, as such.Small Community Air Service Development Grant 10

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **As the capacity has been reduced, this has choked o ff not only local**  **passenger ridership, but has had a devastating effe ct on the local**  **economy, which depends heavily on in-bound tourist traffic visiting the**  **region, including Acadia National Park, which is th e nation’s tenth most**  **visited park, with 2.2 million annual visitors, the vast majority in the**  **summer period.**

**This travel demand for Maine is illuminated by the fact that in the peak**  **period third quarter of the year, 70% of all air tr avelers at Bangor are in**  **bound generated – i.e., visitors. The reduction in air service acc**  **ess over the past three years has been exceptionally damagin**  **g to the region’s economy by not having the capacity or acceptable fa**  **re levels to meet this demand. The loss of capacity was not due to low pas**  **senger load factors. The airport would point out that the service exampl**  **e shown on the map on the prior page for August 2007 was one that was**  **highly successful for the airlines – these flights were essentially full,**  **and were meeting the strong demand in the Bangor marketplace**  . The load factors for August 2007 tell the story...

Airport Airline System Total Pax Total Seats Load Facto r Total Flights


### ATL 7,391 8,540 86.5% 122

DL 7,391 8,540 86.5% 122 

### BOS 9,877 11,646 84.8% 437

AA 6,154 7,010 87.8% 187

DL 3,723 4,636 80.3% 250 

### CVG 5,252 5,899 89.0% 118

DL 5,252 5,899 89.0% 118 

### DTW 7,084 8,250 85.9% 165

NW 7,084 8,250 85.9% 165 

### EWR 3,388 3,934 86.1% 87

CO 3,388 3,934 86.1% 87 

### LGA 4,973 5,884 84.5% 137

AA 2,376 2,884 82.4% 77
US 2,597 3,000 86.6% 60 

### PHL 10,118 11,982 84.4% 181

US 10,118 11,982 84.4% 181



### 48,083 56,135 85.7% 1,247 Totals

**This point is made to illuminate the clear fact tha t the current deficiency in**  **air service at Bangor is not due to lack of demand, but represents shifts in**  **the airline industry that have left the market with what is now clearly**  **insufficient capacity. 2** 

**2 Source: Aviation DataMinerTM analysis of US DOT T-1**  **00 data for August, 2007.** 

### Flights Averaged **Almost 86% Full In Summer of 2007** 

Using August 2007 - when capacity was much higher than today - as an example, the BGR market essentially filled all flights.

Today, load factors remain well over 80%, yet capacity is down 18%.

Without question, the loss of this capacity has choked off demand – particularly for the inbound visitors in the summer who comprise 70% of Bangor passengers.Small Community Air Service Development Grant 11

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Major Deficiencies in Capacity & In Network Access

**Since 2007, Bangor has lost over 40% of its schedul ed network airline**  **departures, and has seen its capacity drop by almos t 30%.**  **3**

System Dest 2007 2010 Change % Change 2007 2010 Change % Change

AA 1,392 (1,392) -100.0% 51,504 -51,504 -100.0%

BOS 1,052 (1,052) -100.0% 38,924 -38,924 -100.0% LGA 340 (340) -100.0% 12,580 -12,580 -100.0%
CO 432 (432) -100.0% 17,557 -17,557 -100.0%

EWR 432 (432) -100.0% 17,557 -17,557 -100.0%
DL 2,581 1,619 (962) -37.3% 104,412 82,850 -21,562 -20.7%

ATL 500 (500) -100.0% 35,000 -35,000 -100.0% BOS 1,389 (1,389) -100.0% 34,792 -34,792 -100.0% CVG 692 (692) -100.0% 34,620 -34,620 -100.0%
DTW 890 890 46,302 46,302 JFK 189 189 9,450 9,450 LGA 540 540 27,098 27,098
NW 809 60 (749) -92.6% 40,450 3,000 -37,450 -92.6%

DTW 798 60 (738) -92.5% 39,900 3,000 -36,900 -92.5% MSP 11 (11) -100.0% 550 -550 -100.0%
US 1,199 2,165 966 80.6% 69,708 113,085 43,377 62.2%

DCA 32 32 1,600 1,600 LGA 131 979 848 647.3% 6,550 43,074 36,524 557.6% PHL 1,068 1,154 86 8.1% 63,158 68,411 5,253 8.3%

6,413 3,844 (2,569) -40.1% 283,631 198,935 -84,696 -29.9%

Schedule Compare: Airport Drill Down

Airport: BGR Departures Seats

Total

**As noted, this reduction has been entirely the resu lt of changes in the**  **airline industry, and not any lack of demand at Ban gor. Flights have**  **maintained load factors in the 80%+ range, which me ans that when seats**  **are offered, they are quickly booked. Conversely, w hen seats are**  **reduced, consumers simply are cut off from flying f rom – and most**  **importantly,** to

**– Bangor.**

**Note that on an annualized basis, Bangor in 2010 wi ll have almost 85,000**  **fewer departing seats. Based on the simple math of the market’s**  **traditional 80% load factors, this would indicate t hat today, Bangor is**  **losing approximately 67,000 enplanements – or 134,0 00 O&D** 
**passengers per year.**

**3 This is in addition to Allegiant, which serves two**  **Florida points on a 2 to 3 per week basis, and off ers**  **absolutely no connectivity whatsoever. It’s model i s to generate vacation traffic, not to fill existin**  **g air service demand.**  

### It’s Not Just BGR **That’s Being Hurt...** 

When consumers seeking to travel to the region can’t find a seat, or can only find one at high fares, they either use PWM or simply don’t come to Maine at

all.

The Airport estimates that Bangor is losing 67,000 outbound and inbound passengers per year due to the loss of capacity.

In terms of lost consumer spend, it is roughly projected that this costs the Maine economy at close to $20 million annually.Small Community Air Service Development Grant 12

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Lack of Capacity Is The #1 Deficiency

**Bangor International has seen its traffic choked of f simply due to declines**  **in network airline capacity. For the full year ending 5/31/2010, the market**  **filled just short of 80% of the network carrier sea ts offered. This includes**  **both peak and off-peak periods. 4** 

City System Total Pax Total Seats Load Factor Total Flig hts

BOS 24,458 29,168 83.9% 583

DL 24,458 29,168 83.9% 583

DCA 1,691 2,250 75.2% 45

US 1,691 2,250 75.2% 45

DTW 66,135 77,220 85.6% 1,542

DL 66,135 77,220 85.6% 1,542

EWR 11,409 13,210 86.4% 237

CO 11,409 13,210 86.4% 237

JFK 60,300 71,445 84.4% 1,365

AA 2,307 2,616 88.2% 15

DL 57,993 68,829 84.3% 1,350

LGA 55,879 84,527 66.1% 2,125

US 47,360 73,477 64.5% 1,904

DL 8,519 11,050 77.1% 221

MSP 1,216 1,464 83.1% 22

DL 1,216 1,464 83.1% 22

PHL 96,106 120,572 79.7% 2,227

US 95,186 119,356 79.7% 2,211

YX 920 1,216 75.7% 16



### Totals 317,194 399,856 79.3% 8,146

**Of importance to this application are the load fact ors in the US Airways**  **Philadelphia market, and in the Delta Detroit marke t. It is these airports**  **that today serve as the main connecting hub gateway s for Bangor.** 

**Buttressing the objectives of the requested grant a re also the load factors**  **that were experienced by Continental in the Newark market – over 86%.**  **The service was deleted due to congestion issues at Newark, not due to**  **lack of traffic or revenue.**

**These data underscore the community’s contention th at the addition of**  **service to either the United hub at ORD or the Unit ed hub at IAD will** 

**4 Source: Aviation DataMinerTM analysis of T-100 data**  **. Note that Allegiant semi-charter service is not included. These flights run at 90% plus load factor**  **s and if included in the above data would skew the load factors for the market up over 80%.**  

### Lack of Capacity **To Airline Gateways Is**  **Deterring BGR Traffic.** 

Note that both PHL and DTW have very high load factors. These are the two main connecting gateways for BGR, and represent choke points for consumers to fly to or from the community.

Clearly, these data show that the additional service which the grant will make possible will be successful from day

one.Small Community Air Service Development Grant 13

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **alleviate a deficiency in capacity, and be profitab le for the carrier. All that**  **is needed is this grant, which will provide a risk “safety net” for the airline.**  **5**



### Lack of Capacity Creates The #2 Deficiency – High F ares

**Fares at Bangor are disproportionately high, which is another result of**  **lack of capacity. When flights are fully booked, pa rticularly in the critical**  **summer periods, airlines have no incentive to cut t icket prices.** 

Rank Market Psgr Avg Fare Psgr Avg Fare Psgr. Gross Fare

1 MCO 20,640 $167.96 134,177 $145.85 306,612 $150.14 2 JFK 14,394 $161.39 93,124 $110.06 3 PHL 14,316 $267.57 64,216 $200.67 304,924 $104.10 4 ATL 12,779 $247.91 68,512 $182.16 30,030 $233.27 5 TPA 10,839 $219.38 60,740 $150.43 193,664 $155.69 6 LGA 9,458 $172.01 61,132 $120.93 18,996 $221.03 7 DCA 8,974 $277.96 59,648 $219.10 42,286 $251.47 8 BWI 7,483 $192.49 110,106 $109.46 371,923 $106.76 9 DTW 7,158 $250.14 19,534 $235.40 48,524 $223.93 10 PHX 6,899 $242.29 26,183 $213.26 82,234 $200.28 11 IAH 6,824 $280.16 20,703 $220.90 18,790 $219.14 12 CLT 6,637 $211.70 48,778 $156.20 29,153 $219.01 13 RDU 6,597 $202.39 28,175 $140.91 46,197 $152.92 14 EWR 6,453 $153.60 39,164 $159.03 21,802 $162.03 15 FLL 5,562 $254.50 35,780 $171.68 73,145 $161.65 16 CVG 5,449 $167.59 7,843 $197.51 10,212 $186.77 17 ORD 5,390 $277.54 51,827 $236.08 60,540 $175.27 18 MSP 5,338 $286.92 20,462 $248.51 30,648 $209.51 19 LAS 5,227 $289.35 26,171 $207.71 92,336 $192.50 20 DFW 5,091 $343.07 20,689 $227.43 27,623 $211.19 21 RSW 5,035 $223.58 32,710 $173.99 50,123 $170.98 22 LAX 4,831 $349.54 30,192 $232.68 39,574 $215.34 23 SFO 4,329 $323.17 31,481 $235.82 28,785 $238.48 24 DEN 4,263 $328.97 35,203 $222.79 57,192 $198.35 25 ORF 3,932 $240.65 16,296 $171.91 28,471 $141.18

382,193 $236.60 1,816,571 $185.73 3,107,184 $170.44

Variance From BGR -21.5% -28.0% All Markets 

### BGR PWM MHT

**Comparing Bangor fares to those of Portland reveals a 21.5% average**  **fare differential, and much higher fares to all but one of the airport’s top**  **25 destinations. Consumers at Bangor also pay an av erage of 28% more**  **to fly than do consumers at Manchester, NH. 6** 

**5 United is the prime target. However, if due to unf**  **oreseen circumstances, such as issues surrounding the Continental merger, United finds it**  **self unable to participate, the US Airways hub at Charlotte is identified as an alternative.** 

**6 Fares are for the full year ending 3/31/10, and ar**  **e one-way, including federal fees and taxes. Source: Aviation DataMinerTM analyses of DB1B data,**  **adjusted for each carrier and reconciled to airport and T-100 tables.**  

### Bangor **Consumers and Visitors Are Paying**  **Double-Digit Fare Premiums** 

Portland is now taking significant traffic from Bangor due to lower fares.

If this is not addressed, PWM could evolve into the de facto entry point for Northern Maine, to the economic detriment of the entire region.Small Community Air Service Development Grant 14

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **The constriction of capacity at BGR is one major cu lprit for this situation.**  **However, both PWM and MHT also benefit from the pre sence of low-fare**  **carriers. Bangor International has no illusions tha t the capacity which the**  **grant will make possible will serve to completely r esolve this situation. But**  **the entry of an additional 200+ seats per day in th e BGR market to a**  **major connecting hub gateway will bring some fare d iscipline into play.** 



### Capacity Trends – Falling Consistently

**While passenger enplanements are down 10.7% (2009 c ompared to**  **2002), airline capacity has been slashed by 35.4%.**

220,000 240,000 260,000 280,000 300,000 320,000 340,000 360,000 380,000

2002 2003 2004 2005 2006 2007 2008 2009

Bangor Annual Capacity – Seats Scheduled

**This again indicates that the additional capacity a nd air access this grant**  **will provide will be profitable very soon after ser vice initiation. This would**  **mean that risk to the Department will be minimized as well.**  

### Add The Capacity, **And The Passengers Will**  **Follow**

Since 2002, capacity has been cut by over 35%.

Enplanements have declined by just 10.7% - resulting in a situation today where flights are effectively operating at capacity and BGR demand is spilling to Portland.Small Community Air Service Development Grant 15

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Passenger Trends Mirror The Lost Capacity

**Reviewing the traffic trends at BGR is very instruc tive – and of great**  **concern – in regard to the gravity of the air servi ce deficiencies of high**  **fares and declining capacity.**

**2002 2003 2004 2005 2006 2007 2008 2009 Enplanements**  **209,410 204,136 226,153 240,300 207,505 201,991 175,076 18 6,884**  150,000 160,000 170,000 180,000 190,000 200,000 210,000 220,000 230,000 240,000 250,000 **Bangor Historical Enplanements**

**The enplanement trend has been consistently down si nce 2005. Note on**  **the chart below that the summer peak travel has dec lined each year as**  **well. This is due to the decline in capacity offere d by airlines, and not any**  **weakness in the BGR and Northern Maine marketplace.**

10,000 15,000 20,000 25,000 30,000 35,000Jan-05Mar-05May-05Jul-05Sep-05Nov-05Jan-06Mar-06May-06Jul-06Sep-06Nov-06Jan-07Mar-07May-07Jul-07Sep-07Nov-07Jan-08Mar-08May-08Jul-08Sep-08Nov-08Jan-09Mar-09May-09Jul-09Sep-09Nov-09

Enplanements Linear (Enplanements)Small Community Air Service Development Grant 16

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___________________________________________________ __________________ Bangor International Airport **The data are disturbing because lack of capacity cl early is causing visitor**  **travel to decline. The summer peaks typically repre sent passenger traffic**  **that is 70% to 75% inbound visitors. Gaining additi onal capacity will help**  **to greatly alleviate this deficiency in seats.**



### The Economic Damage Is Real & Demonstrable

**Because in-bound visitors represent 52% of Bangor’s year-round traffic,**  **and 70%+ in summer months, the reduction in airline capacity represents**  **significant loss of economic impact for the region.**

**Most of these lost passengers are likely using PWM, which has much**  **lower fares and more service due to its access to m uch larger population**  **centers. But a portion of this lost traffic really is “lost” to the Maine**  **economy – when some consumers can’t book a seat, or can only do so at**  **very high fares – they simply don’t come to Maine a t all.** 

**The most recent example of the damage this lack of air service capacity**  **has had on the Bangor economy is the major pull-dow n in summer**  **cruises operated by American Cruise lines.**

Because of high airfares, American Cruise Lines Is Moving Most of Its Summer Departures To Portland.

**The cruise line found it necessary to cut departure s at Bangor from 21 to**  **just six. The reason for the loss of this business is singular: air service.**  **There are insufficient seats, and the fares have re sulted in the cruise line**  **finding it difficult to fly customers into Bangor.** 

### Lack of Capacity **and High Fares Inflict Long-Term**  **Damage To The Region’s Economy** 

The dollar losses are in the tens of millions simply because consumers cannot get to Bangor from the rest of the nation.Small Community Air Service Development Grant 17

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport **The Vice President of Marketing of the American Cru ise Lines made it**  **quite clear:**

“We love Bangor. The city has been good to us. It w as a tough decision... It all came down to a lack of flight opti ons and the cost of flying into Bangor .”

**The Airport and the Community would point out that the service outlined**  **in this application could be critical in getting th e cruise line to return at all**  **in 2011.**

**This is just the tip of the financial iceberg threa tening the Bangor**  **economy. Simple back-of-the-envelope math can give an idea of the**  **situation. Based on traditional load factors, we ha ve estimated a loss of**  **67,000 annual visitors arriving at Bangor, due to t he reduction in airline**  **capacity.**

**It we assume that 70% of these visitors use Portlan d or other alternative**  **entry points, but the remainder decline to travel t o Maine at all because of**  **lack of BGR capacity, the dollars lost to the econo my are staggering.** 

**The State of Maine reports that each visitor spends an average of $962**  **while in the state – and over $1,050 during summer months. If we just**  **take the lower figure, and apply it to an estimated loss of 30% of the**  **inbound visitors Bangor has experienced due to redu ctions in air service,**  **it represents an economic hit of $19.4 million annu ally.** Small Community Air Service Development Grant 18

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## Grant Objective: Additional Hub Access

**While there are a number of options for attaining a dditional connectivity to**  **the US air transportation system, the Airport has a nalyzed those that will**  **provide the strongest return for the Department’s g rant dollars. The**  **following are the primary targets.**



### United Airlines – ORD or IAD

**The Airport has identified two options that will ad dress the need for**  **additional hub gateway access at BGR. These are the United Airlines**  **operations at Washington/IAD and at Chicago/ORD.**

**While the Chicago option offers more connections, W ashington**  **represents less flying and strong connectivity to E urope as well as the US**  **and Latin America. Because United is in the merger process with**  **Continental, the carrier has not determined as yet the strategic roles**  **these hubs will play at the combined airline. As a result, traffic and**  **revenue analyses were accomplished for both.**

**Route metrics and traffic forecasts follow. In both cases, it is felt that the**  **projections are conservative and represent scenario s where traffic and**  **revenue will build very quickly, minimizing the exp osure of the grant fund**  **to revenue guarantees.**Small Community Air Service Development Grant 19

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Route Pro Forma – Chicago/O’Hare

**Market Distance 975** 
**Aircraft CRJ-700** 
**Service Pattern 2 Roundtrips** 
**Annual Seats 82,431**  **Annual Flights 1,249**  **Completion Factor 96.0%** 
**Block Time 2.3** 
**Annual Block Hours 2,873** 
**Annual Seats 82,431** 
**Cost Per Hour $3,945** 
**CASM $0.1410**  **Annual Segment Operating Cost** $11,332,251

Local Traffic
**ORD Local O&D 8,490** 

**ORD Local PDEW 11.6**  **Average Fare $0.00**  **Local Revenue $2,400,578**
**Local Yield $0.2900**  Connecting Traffic **Connecting Traffic 61,466**

**Connecting PDEW 84.2**  **Connecting Revenue $10,837,992**

Totals **Onboard Passengers 69,955**

**Total PDEW 95.8**  **Pro-Rated Revenue $13,238,570 Less Displacement (10%) $1,323,857**  **Net System Revenue** $11,914,713 **Net Average Revenue per Passenger $189.24**

**Average Market Yield $0.1747**
**Market RASM $0.1482** 

**Annual ASMs 80,370,576** 
**Annual RPMs 68,206,389**  **Segment Load Factor 84.9%**  Projected Segment Operating Profit $582,462

**Operating Margin 5.1%**  

### Projected Operating Metrics - BGR - ORD

Revenue & Traffic Projections

Load Factor ProjectionsSmall Community Air Service Development Grant 20

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___________________________________________________ __________________ Bangor International Airport 

### Route Pro-Forma – Washington Dulles

**Market Distance 600** 
**Aircraft CRJ-700** 
**Service Pattern 2 Roundtrips** 
**Annual Seats 82,431**  **Annual Flights 1,249**  **Completion Factor 96.0%** 
**Block Time 1.8** 
**Annual Block Hours 2,248** 
**Annual Seats 82,431**  **Cost Per Hour $4,290** 
**CASM $0.1950**  **Annual Segment Operating Cost** $9,644,469

Local Traffic
**IAD Local O&D 6,282** 

**IAD Local PDEW 8.6**  **Average Fare $213.72**  **Local Revenue $1,342,619** Connecting Traffic **Connecting Traffic 48,746**

**Connecting PDEW 66.8**  **Connecting Revenue $9,940,399**

Totals **Onboard Passengers 55,028**

**Total PDEW 75.4**  **Pro-Rated Revenue $11,283,018 Less Displacement (10%) $1,128,302**  **Net System Revenue** $10,154,716 **Net Average Revenue per Passenger $205.04**

**Average Market Yield $0.3076**
**Market RASM $0.2053** 

**Annual ASMs 49,458,816** 
**Annual RPMs 33,016,777**  **Segment Load Factor 66.8%**  Projected Segment Operating Profit $510,247

**Operating Margin 5.3%**  Revenue & Traffic Projections

Load Factor Projections 

### Projected Operating Metrics - BGR - IADSmall Community Air Service Development Grant 21

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## Proposed Grant Structure

**Bangor International Airport and the community full y believe that the**  **market will support either of the hub access scenar ios outlined in this**  **document.**

**The intended structure of the grant, combined with the local 50% match**  **will be as follows:**

• **This is not a subsidy program . It is merely a financial safety net to**  **reduce the risk for the carrier. If the revenue goa ls are met – and**  **there is every indication that the Bangor market ca n do so – the**  **revenue guarantee portion of the grant will not be expended.** 

• **BGR and the airline will negotiate to provide two daily (week-day**  **with reduced week-end flying) round trips in the ma rket. The**  **agreement will provide agreed-upon per-flight costs , including a**  **reasonable profit hurdle.**

• **Revenues generated across the United system by the Bangor**  **service will be reviewed at the end of the first 6- month period. Any**  **shortfall will be addressed by the revenue-guarante e portion of the**  **grant funding. This will again be done at the end o f the**  **subsequent six months.**

• **Monthly “short-stop" triggers will be built into t he monitoring**  **program. This will allow the Airport and the carrie r to quickly**  **determine if the traffic is materially below foreca sts in each of the**  **first six months. If so, the Airport and the airlin e can decide to take**  **remedial actions, up to and including early termina tion of the** 
**program.**

• **The carrier will agree to key performance standard s. These**  **include a 96% schedule completion, net of weather c ancellations.**  **On-time arrival performance, using the DOT standard of 15-**  **minutes of the carrier’s published schedule, will b e required.**  **7**

• **The carrier will make all reasonable efforts to sc hedule the BGR**  **flights to connect inbound and outbound at the hub airport.** 

• **The carrier will agree to fare levels in the marke t commensurate**  **with those at comparable peer cities on their route system.** 

• **The program will be for one year from start of ser vice.** 

**Prior to executing any agreement, the airport will provide the revenue**  **guarantee documents to Department staff for review and approval.** 

**7 Typically a 98% completion would be used. However**  **the reality is that both of the scenarios in this document involve both congested airports and conges**  **ted air space.**Small Community Air Service Development Grant 22

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___________________________________________________ __________________ Bangor International Airport 

### Comprehensive Marketing Program

**Bangor International already has an aggressive mark eting program. This**  **will be applied to the proposed service. A point-by -point marketing plan**  **for the new flights will be prepared and submitted to the Department for**  **review. As envisioned, this will include:**

• **Weekly banner ads in the Bangor Daily News to show case the**  **new flights as part of the overall air service acce ss at Bangor**  **International Airport.**

• **The Airport will work with the carrier to use its marketing programs**  **to promote Bangor on its global website.**

• **The Airport will work with key local industries to determine**  **customers, suppliers, and clients in other parts of the nation.**  **These will then be targeted to assure awareness of the new**  **convenience in accessing Bangor.**

• **Targeted mailings will be accomplished, both local ly and to key**  **business targets across the airline’s route system**

**The Airport proposes focus substantial funding to m ake this new service a** 

**success.**



### Program Administration

**The Bangor International Airport will be the offici al point of contact for**  **grant administration, and for liaison with the comm unity, the airline and**  **other stakeholders**



### Progress Reports to DOT

**It will be the responsibility of the Airport to pro vide the required quarterly**  **reports to the Department. However, the Airport has every intention of**  **being pro-actively in contact to keep the Departmen t updated on the**  **progress of the program.**



### Post-Grant Marketing Support

**The Bangor International Airport and the community have an on-going air**  **service enhancement program that includes routine a dvertising,**  **community meetings, and contact with travel generat ors and regional**  **businesses.**

**Subsequent to the end of the revenue-guarantee peri od, these activities**  **will continue. The Airport monitors carrier load fa ctors and traffic**  **performance on an on-going basis, and takes appropr iate action when** Small Community Air Service Development Grant 23

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___________________________________________________ __________________ Bangor International Airport **weaknesses in traffic or revenue are foreseen. The United service**  **outlined in this document will be a part of that pr ogram.** 



### Proposed Grant Fund Allocation

Marketing &
Promotional Support Airline

Revenue Guarantee Total



## Community **$83,333 $166,667 $250,000** 

## US DOT **$166,667 $333,333 $500,000**



### TOTAL $250,000 $500,000 $750,000

**In addition, the Airport has a professional in-hous e ground handling**  **operation, and this will be offered to reduce the c apital costs of ground**  **equipment and staffing should the carrier request s uch services.** Small Community Air Service Development Grant 24

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

### Bangor Prior Air Service Development Efforts

**Bangor has an active air service development and en hancement program**  **directed by a full-time staff member.**

• **The Airport is in constant contact with current an d potential**  **airlines to assure that no air service opportunitie s are missed.** 

• **Thanks to a 2004 Small Community Air Service Devel opment**  **Grant, Bangor was able to offer sufficient marketin g and**  **promotional support to attract the entry of Allegia nt. This company**  **provides high-value, low-cost vacation packages to Florida, and**  **has been very successful in the Bangor market.**

• **The Airport continues to work with incumbents Delt a and US**  **Airways in regard to fare and capacity issues.**

• **As the nation’s premier international gateway for charter and**  **business aviation flights from Europe, the Airport is extensively**  **engaged in pursuing expanded international second-t ier and**  **scheduled service options.**

• **The Airport is working with carriers such as Conti nental and**  **American, exploring options to get these carrier sy stems back into**  **the BGR market.**Small Community Air Service Development Grant 25

___________________________________________________ _________________________

___________________________________________________ __________________ Bangor International Airport 

## Summary

**The Bangor International Airport and the Bangor com munity appreciate**  **the opportunity to file this application. We believ e that the situation at**  **BGR is such as to fit the letter and the spirit of Congress in implementing**  **this program.**

**We ask favorable consideration for the following re asons:** 

• The market has experienced significant reductions i n air service over the last five years.

• All of the reductions are due to changes in the str ucture of the airline industry – the Bangor economy is strong and vibrant.

• Air fares are high – over 21% higher than at Portla nd. This, combined with lack of seat capacity, is literally d riving consumers to use that airport instead of Bangor Int ernational.

• The local economy is being harmed by this situation – the reduction in the cruise industry at Bangor, and its potential move in its entirety to Portland is just the latest example.

• The service that this grant will facilitate will op en Bangor to access from additional points, add significant new capacity, and bring new fare discipline to the market

**.**
**If there is further data or information needed, we stand ready to assist the**  **Department.**Small Community Air Service Development Grant 26

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___________________________________________________ __________________ Bangor International Airport 

## APPENDIX BSmall Community Air Service Development Grant 27

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## Letters of SupportSmall Community Air Service Development Grant 31

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___________________________________________________ __________________ Bangor International Airport