# June 11, 2012

Sponsor: McClellan

- Palomar Airport
, Carlsbad, California Peter Drinkwater, Director of County Airports, County of San Diego Congressional Code: CA

- 50
Dun & Bradstreet Number: 1870326770000 Tax Identification Number (EIN): 95

- 6000934 

# McCLELLAN

- PALOMAR AIRPORT , CARLSBAD, CA
Application Under the Small Community Air Service Development Program Docket DOT

- OST

- 2012

- 0069
Application for Federal Support for New Air Service vi a Advertising and MarketingMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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TABLE OF CONTENTS

Introductory Letter of Support 3 Summary Information

– Appendix C 4
Introduction 7
The Carlsbad Air Service Market 8
Current and Historical Service 9 Passenger Leakage and Retention 11 Air Service Development Efforts 16
Air Service Needs and Deficiencies 17 Regional Fare Environment 17 Regional Airline Capacity 19 Per Capita Capacity 20 Strategic Marketing Plan 22 Funding Plan 25 Implementation Timeline 27 Public/ Private Partnership 28
Letters of Support 30
Conclusion 38 

### Section Page NumberMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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INTRODUCTORY LETTER OF SUPPORTMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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SUMMARY INFORMATION

– APPENDIX C

Small Community Air Service Development Program
Docket DOT

- OST

- 2012

- 0069



### A. Applicant Information

Not a Consortium Community now receives EAS subsidy Interstate Consortium Intrastate Consortium Community previously received a Small Community Grant If previous recipient, Date of Grant: ________________________________ Expiration date of G rant: _______________________ Federal Funds Requested: ______________________ Carrier(s) Service Obtained: _

___________________ Destination(s) Served: __________________________



### B. Public/Private Partnership

Public:

1. County of San Diego and McClellan

- Palomar Airport

Private:

1. California Pacific Airlines 2. Carlsbad Chamber of Commerce 3. San Diego North Convention and Visitors Bureau 4. San Diego North Chamber of Commerce 5. San Diego North County Economic Development Council 6. Palomar Airport AssociationMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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C. Project Proposal

Marketing Upgrade Aircraft New Route
Travel Bank Service Restoration Subsidy Surface Transportation Regio nal Service Revenue Guarantee Launch New Carrier Start

- Up Cost Offset First Service Study Secure Additional Service Other (Specify)



### D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other: GPS Approach



### E. Project Cost

1. Federal amount requested: $ 500 ,000
2. State cash financial contribution: $ 0
Local cash financial contribution:
3a. Airport cash funds: $ 150,000
3b. Non

- Airport cash funds: $ 25 0 ,000
3. Total local cash funds: $ 4 0 0,000
4. TOTAL CASH FUNDING: $ 9 0 0,000
In

- Kind Contribution:

a. Airport In

- Kind contribution: $ Various
b. Other In

- Kind contribution: $ Various
5. TOTAL IN

- KIND CONTRIBUTION: $ Undetermined
6. TOTAL PROJECT COST: $ 9 0 0,000 + In

- Kind



### 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. Advertising and marketing match money ( airport and media companies)McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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

This application was made available to the s tate under the Executive Order 12372 Process for review on ______. Program is subject to E.O 12372, but has not been selected by the state for review

. Program is not covered by E.O 12372

.



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

NoMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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INTRODUCTION

T he McClellan

- Palomar Airport in Carlsbad is ideally located to serve the northern half of San Diego County. It has easy access to Interstate 5, and is surrounded by major southern California company headquarters, including Callaway Golf, Qualcomm, Geico, Sony, Northrop Grumman, the Gemological Institute, ViaSat, Cobra Golf, Taylor Made Golf, and Cox Communications. The potential passenger base includes 11% of the populati on of Southern California

– more than 1.1 million unique residents.

The Airport’s True Market Study quantified the size of the passenger market

. It found just 1.6% of total passengers generated in the area closest to the McClellan

- Palomar Airport, actually use the Airport. The catchment area “ leaks ” an average of 4,400 passengers per day each way to other airports, clogging already congested Souther n California freeways and increasing the carbon footprint of travelers throughout the region.

The Airport did see its passengers grow in the last year, despite rising fares. An average of 127 passengers per day each way used McClellan

- Palomar Airport in 2011

– up by 64% over 2010. At the same time, the average fare at McClellan

- Palomar Airport we nt up by 19% to $172 each way

– the third highest of all airports in S outhern California.

The Airport, nonetheless, is scratching the surface of its potential. One carrier

– a new carrier for
the West Coast

– has seen the potential of the market. The De partment of Transportation has given California Pacific Airlines (also known as “CP Air” and, simply, “California Pacific”) its economic authority to operate, using McClellan

- Palomar Airport as their base of operations. California Pacific plans d aily non

- stop s ervice, beginning this fall, to Oakland, San Jose,
Sacra mento, Las Vegas, and Phoenix. The Airline will take delivery of the first of four new Embraer E 170 jets at the end of June 2012 . Ca lifornia Pacific has pledged $25 0,000 in cash for marketing and advertising under this proposal.

Unlike most other proposals, this Grant project will also lead to the creation of several hundred new jobs in Carlsbad. With its headquarters near the Airport, CP Air plans to have a little over 100 employees working full

- time in Carlsbad at service launch, by the fourth quarter of 2012. This number is projected to grow to 500 employees by the fifth year of service. 

## “...this Grant project will also lead to the creation of several hundred new jobs in

Carlsbad.”McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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THE CARLSBAD/NORTH SAN DIEGO COUNTY AIR SERVICE MARKET Current and Historical Air Service

McClellan

- Palomar Airport lies at the center of one of the most densely populated air service catchment areas in the country. Yet
, despite a large local population, decreasing air service throughout the region, rising fares, and di fficult freeway traffic to reach alternate airports,
McClellan

- Palomar has been unable to secure service beyond turboprops flying to LA.

The revised Carlsbad catchment area , seen in green in map 1, is home to 1,143,326 people as of
the 2010 US Census

. The Carlsbad area comprises 11.2 % of the overall population of the entire
shaded area

– the area that includes San Diego, Carlsbad, Orange County, and
L ong Beach. The total population of
the shaded area is
10.2 million , making it one of the most populous catchment areas of any airport in the country. Despite comprising 11 % of the region’s population, most of Carlsbad
catchment area passengers fly from

o ther airports in the region , largely due to the breadth of service offered at those other airports
, and in spite of the clogged freeways that lead to those airports

. 

### MAP 1 : The McClellan

- Palomar Airport Catchment Area Sources: Sixel Consulting Group; 2010 US CensusMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 9 As of July of 2012, the Airport has just six departing flights per day on average, all on 30

- seat turboprop aircraft, with an average of only 189 daily outbound seats (see figure 1). Service is only provided to a single destination

– Los Angeles International (LAX). The service is clearly not designed for local passengers

– but relies entirely on onward connections. Despite the relative size of the Carlsbad catchment area, the Airp ort has much less service than other California markets home to more th an a million people. Overall Carlsbad airline capacity is down more than 20% since the summer of 2008 when the market had eight departures per day, instead of six

.

There were signs of a passenger turnaround at McClellan

- Palomar Airport in 2011. For the first time since 2006 the market saw a large spike in origin and destination passengers. The Airport saw the largest number of passengers since 2007, up 64% over 2010. In 2011, the Ai rport saw an average of 127 passengers per day each way, which was up by an average of 49.5 passengers per day each way over 2010 (see figure 2 on next page ). Still, total passengers are well off the high mark set in 2006 of almost 180 passengers per day each way. Since that time, passengers in the Carlsbad market have dropped by 29%.

The 2011 passenger increase happened despite rising fares. The one way average fare at
McClellan

- Palomar Airport was $172 in 2011 (see figure 2 on next page ). This ranked as the third highest in Southern California for the period. The Airport’s average fare was up by $27 each way since 2009, or 19%. But the market did not follow the trend of most non

- hub airports with rising fares in 2011 as it was strong enough to show a passenger increase despite the high fares. 

### FIGURE 1 : Scheduled Service at McClellan

- Palomar Airport July 2011 vs. July 2012; Source: OAG Schedule Data, May 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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The Airport has seen a marginal increase in capacity, as SkyWest added its sixth LAX per day flight bac k into the schedule at the beginning of 2011. Despite the extra seats, passengers stayed relatively steady. This resulted in an overall load factor of just 67% for the 12 months ended February 2012

– illustra ting the market has only so much demand for the short connector flight to LAX (see figure 3 on next page )

.

It should be noted there was a downward spike in available seats and passengers at the Airport from January of 2010 through July of 2010, with the downward valley in May and June of that year (see figure 3 on next page ). This was due to runway construction that necessitated periodic runway closure

– not a move by SkyWest or United to trim the market’s capacity.

While 2011 passengers did increase at McClellan

- Palomar Airport, passenger retention was still low. The vast majority of passengers in the Airport’s catchment area use other airports to access the national air transportation system. In preparation for its application for Grant funding, the
McClellan

- Palomar Airport commissioned a True Market/Leakage /Retention study, so that it could better understand its local air travel market before requesting federal funding for 

### FIGURE 2 : O&D Passengers and Average One Way Fares at McClellan

- Palomar Airport, Source: US DOT Table OD1A; Calendar Year 2003

– Calendar Year 2011McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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additional flights. The study results show that the Airport retains just 1.6 % of the passengers generated by its local, immediate catchment area.

Most of those “lost” passengers found their way to service at other airports in the region, such as San Diego International and John Wayne Airport in Orange County. The majority of C arlsbad area passengers , in fact, cur rently fly out of San Diego’s Lindbergh Field. As of the year ended first quarter 2010, according to the Airport’s True Market/Leakage Study, the
McClellan

- Palomar Airport’s catchment area generated 2,485,803 total pas sengers who flew out of San Diego , or an average of 3,405 passengers per day each way (see f igure 4 ). 

### FIGURE 4 : Carlsbad Area O&D Passengers by Airport Used Source: Sixel Consulting Group True Market Study; YE1Q10 FIGURE 3 : Average Daily Available Seats, Daily Onboard Passengers, and Load Factor Source: US DOT T100 Data; January 2010

– February 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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The Airport’s catchment area generated an additional 518,394 passengers , or 710 passengers per day each way, who flew out of Los Angeles International (LAX); 184,677 passengers , or 253 passengers per day each way, who flew out of John Wayne Airport in Orange County; 59,393
passengers , or 81 passen gers per day each way who flew out of Ontario; and 6,403 passengers
, or nine passengers per day each way, who flew out of Long Beach (see figure 4 on previous
page ) . Only 53,520 Carlsbad

- area
passengers , or 73 passengers per day each way, actually flew ou t of the
McClellan

- Palomar Airport as of the year ended first quarter 2010

– or 1.6% of the catchment area’s total passengers. In other words, Carlsbad leaks 98.4% of its origin and destination passengers to other airports in Southern California. That
le akage represents an average of 4,407 passengers per day each way.

In most markets that experience poor passenger retention, the reason local catchment area residents drive to other airports is due to lower fares available at those other airports. That does not appear to be the primary reason for passenger leakage in Carlsbad. In fact, the average fare paid by Carlsbad catchment area residents at McClellan

- Palomar Ai rport was $151 each way, according to the True Market Study reflecting data from the year ended first quarter 2010 (see figure 5). During that period, passengers actually paid more to fly out of their number one “leak point”

– San Diego International

– th an they paid to fly from Carlsbad, itself. The San Diego average fare was calculated at $172 each way, while the Los Angeles International (LAX) fare was $171 each way.

It appears passengers who live in the McClellan

- Palomar Airport catchment area are mo re likely to leak to other airports for more convenient service, rather than over concerns about the fare at that airport. San Diego has current non

- stop service to more than 40 cities, with an average of more than 28,000 daily departing seats. Los Angel es has non

- stop service to more than 130

non

- stop cities and more than 100,000 daily departing seats. Carlsbad area passengers are 

### FIGURE 5 : Average One Way Fares by Airport Used Source: Sixel Consulting Group True Market Study; YE1Q10McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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much more likely to find the s ervice they need, that works with their schedules, at either San Diego or Los Angeles, and tha t is why they choose those airports. It’s important to note that
future service at McClellan

- Palomar Airport must fly non

- stop to top passenger markets to be successful. Fare is not as important a factor as convenience for this catchment area.

Seven of Mc Clellan

Palomar Airport’s top
ten origin and destination passenger
markets are on the West
Coast

. It is clear passengers in the area most value convenient, frequent flights to cities in the West

– with a particular focus on the San Francisco Bay Area. The market’s nu mber one true origin and destination passenger market is San Francisco
, with an aver age of
almost 257 passengers per day each way according to the Airport’s True Market Study reflecting data from the year ended first quarter 2010 (see figure 6 ). Among other Bay Area markets, Oakland ranks as the number two passenger market, generating an average of 204 passengers per day each way, while San Jose ranks as the eighth largest passenger market, with an average of 156 passengers per day each way. In all, the
Carlsbad

– Bay Area market generates an average of almost 618 passengers per day each way, only including passengers to and from the McClellan

- Palomar Airport catchment area. Less than 3% of current catchment area passengers to and from the Bay Area use McClellan

Palomar Airport. 

### FIGURE 6 : Carlsbad’s Top True O&D Passenger Markets Source: Sixel Consulting Group True Market Study; YE1Q10McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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Generally, passenger retention from the local catchment area is poor to all of Carlsbad’s top 20
true markets. McClellan

- Palomar Airport’s best passenger retention is to markets on the East
Coast . The Carlsbad

– Orlando market retains 5% of local catchment area passengers, the Washington Dulles route retains 4% of passengers, and the Baltimore route retains 3% of passengers. The reason these routes retain better than West Coast routes is th at, even with the connection time taken into account, the total travel time is close to what it would be flying from another airport in the region.

Since almost 99% of the passengers from the
McClellan

- Palomar Airport
catchment area leak to
other airports for their trips, a more accurate way to look at the fare in the region is to average it over all the trips taken by local catchment area passengers at all the airports they choose to use. This “true average” fare was $173 each way for the year

en ded first quarter 2010

– the study period for the Airport’s True Market Analysis (see figure 7). The “true average” fare is brought down by the presence of low cost carriers at airports Carlsbad area passengers leak to, w ith Southwest, Virgin America, J et Blue, and others at most Southern California airports besides McClellan

- Palomar.

Higher fares often arise from a lack of competition. There is no current airline competition at the
McClellan

- Palomar Airport. But
, w hile United Express/SkyWest has a 100% m arket share of both passengers and revenue at the McClellan

- Palomar Airport, United does not rank as the top airline for Carlsbad catchment area passengers when all catchment area passengers, traveling from all airports, are taken into account

. 

### FIGURE 7 : True Average One Way Fares at Top Passenger Markets Source: Sixel Consulting Group True Market Study; YE1Q10McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 15 The Airport’s True Market/Leakage Study shows that most Carlsbad catchment area passengers use Southwest Airlines

– not United service provided directly at th e Airport, itself (see Figure 8 ). These Southwest passengers are leaking, primarily, to San Diego and Los Angeles International (LAX). Despite the fact
that Southwest does not serve Carlsbad, it captures almost a third of
all Carlsbad catchment area passengers at other airports in
Sou thern California. United ranks as the market’s second largest carrier, with 14% of the total market, while American ranks third with 12.5% of the market’s origin and destination passengers. Somewhat surprisingly, low cost carriers not named Southwest dra w just a combined 6.6% of Carlsbad area passengers, which again suggests fare is not the major consideration in choosing which airline and airport to

use.

The data points to the fact that passengers in the McClellan

- Palomar Airport catchment area
seek co nvenient service, with few stops, and short travel time, above all else. The contradiction in this thinking is forgetting about the frequently snarled traffic on southern California freeways, and the cost of gas to get travelers to their airport of origin . As fuel prices rise, and as the population grows, McClellan

- Palomar Airport will be an essential gateway to northern San Diego County as local passengers work to avoid the drive to other airports. 

### FIGURE 8 : Carlsbad’s True Airline Passenger Share Source: Sixel Consulting Group True Market Study; YE1Q10McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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AIR SERVICE DEVELOPMENT EFFORTS

In preparation for this application, McClellan

- Palomar Airport and San Diego County held an air service support meeting and roundtable in May of 2012 at the Carlsbad Chamber of Commerce (see figure 9) . Virtually all major users of air service, including all local chambers, local governments, and many local businesses, took part. Also taking part was the leadership team from California Pacific Airlines.

The Airport had its air service development consulting firm present to the attendees on the state of local air service, the needs and deficiencies of service at
McClellan

- Palomar Airport, and the potential for success of the California Pacific model. The meeting also helped to develop the matching funds for this application. At the meeting, California Pacific leadership committed $250,000 in private matching funds to this project. The County of San Diego also committed $150,000 in funding.

In addition to this meeting, the Airport has been working to develop air service for the last five years. It has held meetings with various airlines, and the Alaska Air Group has visited the facility for a meeting. Service on other carriers is not imminent, but is still part of the lon g

- term air service development plan. 

### FIGURE 9 : McClellan

- Palomar Airport Presentation Source: Sixel Consulting Group; May 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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AIR SERVICE NEEDS AND DEFICIENCIES

The key deficiency in air service at McClellan

- Palomar Airport has been discussed extensively in this application

– passenger leakage to other airports in Southern California. Carlsbad retains just 1.6% of the passengers generated in its catchment area as of its latest True Market Study. 98.4% of Carlsbad catchment area passengers travel from other airports. This extensive passenger leakage from the Carlsbad catchment area pu ts a large burden on the already saturated freeway system of Southern California. The region is known for its traffic bottlenecks. The more than three million annual passengers generated in the local catchment area could be much better served by the McCl ellan

- Palomar Airport. Moreover, it would likely save the Department of Transportation further funding for the Southern California roadway system should it support further development of the McClellan

- Palomar Airport.

While much of the passenger leakage from the
McClellan

- Palomar catchment area is based on the breadth of non

- stop service offered from other airports, passengers are beginning to be suppressed and forced away from the local airport by rising fares. The average fare in the Carlsbad market in calendar year 2011 was $172 each way (see figure 10). That fare is up by an average of $27 each way in the last two years, or 19%. The Carlsbad fare now ranks as the third hig hest in Southern California, after Palm Springs, which is a historically high fare market due to affluent inbound passengers, and Los Angeles, which has the longest average length of haul of any airport in the region due to the breadth of its international service. The average 2011 fare at Orange County/Santa Ana was 4.2% below the fare at McClellan

- Palomar Airport, while the average fare at Long Beach was 50.9% below the Carlsbad average.

Fares have risen throughout Southern California as airlines have cut capacity. The two closest airports to McClellan

- Palomar Airport, San Diego Lindbergh Field and John Wayne/Orange County have both seen available airline seats cut by more than 10% in the last two years. 

### FIGURE 10 : Average One Way Fares Source: US DOT OD1A; Calendar Year 2011McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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Specifically, in Sa n Diego, airlines have cut an average of 5,167 departing seats per day since the summer of 2010

– or 17% of tot al capacity (see figure 11).

At the same time, airlines serving San Diego have cut their daily departures by an average of 60 per day since summer of 2010 (see figure 11). Airlines have trimmed the number of total flights offered at San Diego by 17 % since June of 2010. McClellan

- Palomar Airport is well positioned to help shift the travel patterns of the region, and to enhance se rvice in north San Diego County, reducing congestion on area freeways.

Capacity hasn’t been cut as dramatically at John W ayne Airport in Orange County as it has in San Diego, mainly because airlines have to fly their slots at Orange County in order to hold those assets. Nonetheless, available seats at John Wayne have been cut by 10% since summer of 2010, or an average of 1, 632 departing seats per day (see figure 12 on next page ). 

### FIGURE 11 : Available Seats, Passengers, and Departures per Day Each Way at San Diego (SAN) Source: US DOT T100 Data; June 2010

– January 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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John Wayne Airport has also lost an average of ten departures per day since the summer of 2010 (see figure 12). In August of 2010, airline offered an average of 116 departures per day in Orange County, but they now offer just 106 departures per day

– a lo ss of 9% of the market’s flights. The capacity cuts make Orange County a less desirable alternate airport for passengers living in the McClellan

- Palomar Airport catchment area.

For a catchment area of more than a million residents, McClellan

- Palomar Airp ort does a poor job of retaining local passengers, mainly due to the lack of competitive service. With only one destination and all service on turboprop aircraft
, McClellan

- Palomar flights are often not even considered when north San Diego County resident s book travel. This is evidenced by the Airport’s passenger retention to its top markets. 

### FIGURE 12 : Available Seats, Passengers, and Departures per Day Each Way at Orange County (SNA) Source: US DOT T100 Data; June 2010

– January 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 20 In each and every one of the Carlsbad’s catchment area’s top 20 origin and destination passenger markets, McClellan

- Palomar Airport retains less than 4% of passengers (see figure 13). The best retention, as mentioned earlier in this application, is on longer haul destinations where the connecti on time at LAX is mitigated over a longer length of haul. Examples include Chicago, Washington, DC, Honolulu, and Philadelphia.

McClellan

- Palomar Airport retains particularly poorly to destinations in
the West

– including those along the immediate West C oast . The Airport retains just 1.6% of San Francisco passengers, none of the passengers traveling to Oakland, less than 1% of passengers to Sacramento, and only 0.6% of passengers to and from San Jose (see figure 13). The service target in this proposa l would directly address this deficiency by offering multiple daily non

- stop jet flights to each of those cities.

The Carlsbad market’s poor retention is directly related to the amount of air service offered by its single carrier. In fact, the market ranks as one of the most underserved in the country. Airlines offered just 0.06 seats per capita at McClellan

- Palomar Airport in 2011 (see figure 14). By contrast, airlines offered 5.25 seats per capita in San Diego

– 86 times more seats per capita than they offered in Carlsbad. The regional average for seats per capita was 1.73 in 2011

– 28 times more seats per capita than airlines provided at McClellan

- Palomar Airport. 

### FIGURE 13 : CLD Retention to Top 20 O&D Passenger Markets Source: Sixel Consulting Group True Market Study; YE1Q10

FIGURE 14 : Airline Seats per Capita in Southern California Sources: 2010 US Census; US DOT T100 Data, CY2011McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 21 Similarly, McClellan

- Palomar Airport boarded just 0.04 passengers per capita in 2011 (see figure 15). The average airport in the region boarded 1.39 passengers per capita of its catchment area in the period

– 34 times the number of passengers boarded in Carlsbad. Again, of adjacent airports, San Diego saw the highest number of passengers per capita of its catchment area, with 4.32

– 107 times the number of passengers per capita as
McClellan

- Palomar Airport.

While McClellan

- Palomar Airport faces a number of challenges to its air service, it did report a 64% increase in passengers in 2011. It is clear there is demand for additional service in the market. But the Airport has found it difficult to entice airline partners into working to meet the needs of the market. 

### FIGURE 15 : Passengers per Capita in Southern California Sources: 2010 US Census; US DOT T100 Data, CY2011McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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STRATEGIC MARKETING PLAN

The passenger retention statistics in this application demonstrate the need for additional service
at McClellan

- Palomar Airport . Moreover, they demonstrate that passenger leak to other airports mainly for the breadth of non

- stop destinations, and not on f are. This means the solution to overcoming the regional air service deficiencies is for a carrier to establish a business travel based set of non

- stop markets to which current passenger leakage is highest. This carrier must also offer “big jet” service t o compete with service at San Diego and in the Los Angeles Basin, with relatively high frequency allowing for business travel ers to complete their trip in a single day.

McClellan

- Palomar Airport is fo r tunate to have a partner in this application with the same goals and objectives. The Airport has developed a partnership with California Pacific Airlines ( “ CP Air ” and “California Pacific” ) in support of this strategic plan for additional air service in north S an Diego County. CP Air is providing part of the local matching cash for this plan

– one of the very few Small Community Air Service Development plans for new air service that is being sup ported by direct airline cash.

C alif ornia Pacific has been in existence for four years. Its planning process is nearly complete and it has achieved the Department of Transportation’s economic authority to operate

, essential passing phase one of the certification process . All the Airline still has to do before it can launch service is complete the process to gain certification fro m the FAA. The Airline expects to have certification complete in the fall of 2012 . The timeline for new service under this plan is
the be ginning of fourth quarter of 2012. CP Air has the financial backing to take delivery of the Embraer E 170 aircraft it has on order, and to begin service on this timeline. 

### MAP 2 : Proposed Routes

- Carls bad to OAK, LAS, SMF, PHX, and SJC Source: California Pacific Airlines; Map: Sixel Consulting GroupMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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The first jet will arrive at McClellan

- Palomar Airport in June of 2012, with three more to follow over
the next 18 months.

This strategic plan for improved service does not include simple flights thro ugh a new hub. It includes a number of routes non

- stop from the McClellan

- Palomar Airport to destinations of top demand for catchment area passengers. Th e plan include s new, non

- stop service on California Pacific Airlines to five of the Airport’s top eig ht origin and destination passenger markets (see
map 2 . These markets include Oakland, ranked number two; Las Vegas, ranked number five; Sacramento, ranked number six; Phoenix, ranked number seven; and San Jose ranked number eight.

Collectively, the markets targeted by both California Pacific and the Airport generated almost 640,000 total origin and destination passengers acco rding to the Airport’s True Market Study representing data for the year ended first quarter 2010. Together, the five markets average 875 passengers per day each way, and only 0.6% of the current
Carlsbad catchment
area passengers traveling to the
markets use McClellan

- Palomar Airport

.

The largest of the target markets is Carlsbad

– Oakland. The Airport catchment area generates an estimated 150,000 annual origin and destination passengers to and from Oakland, or an average of almost 205 passengers per day each way (see figure 16). Las Vegas is the second largest of the target markets, generating an average of 185 passengers per day each way. Sacramento generates an average of 171 passengers per day each way, while Phoenix generates almost 158 passengers per day each way, and San Jose generates an average of 156 passengers per day each way. 

### FIGURE 16 : Carlsbad’s Top True O&D Passenger Markets on CP Air Source: Sixel Consulting Group True Market Study; YE1Q10McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

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McClellan

- Palomar Airport passenger retention to each of these markets is exceptionally low. Less than 1% of total passengers traveling to these markets from the Carlsbad catchment area use their local airport. The highest retention is to Las Vegas, where 1.3% of passengers use McClellan

Palomar Airport according to the Airport’s True Market Study which included the year ended first quarter 2010 (see figure 17). McClellan

- Palomar retains less than 1% of passengers to and from all other markets, including Oakland, Sacramento, Phoenix, and San Jose.

In each of the targeted
markets the lowest published fare from
McClellan

- Palomar Airport is higher than the lowest published fare on all carriers from San Diego’s Lindber gh Field. The lowest published Oakland fare from
McClellan

- Palomar is $298 roundtrip while the San Diego fare is $160

– a premium of 86% to fly from Carlsbad (see figure 18). Fares are closer to Sacramento, San Jose, and Phoenix, where the Carlsbad premi um averages at 29%. But to Las Vegas, the lowest published fare from Carlsbad is $96 more roundtrip than the fare from San Diego

- 209% more to fly from McClellan

- Palomar. In all cases, additional competition flying non

- stop from Carlsbad to these destin ations will help to bring fares in line with those found at San Diego. 

### FIGURE 17 : CLD Retention to CP Air Passenger Markets Source: Sixel Consulting Group True Market Study; YE1Q10

FIGURE 18 : Lowest Published Fares from CLD and SAN Source: ExpertFlyer.com; June 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 25

T he area surrounding McClellan

- Palomar Airport should be able to support additional air service as it has the highest concentration of major employers in all of San Diego County

– a higher concentration than
even downtown San Diego, where San Diego International Airport is located. 19 of San Diego Co unty’s top 35 employers, in terms of total employees in the region, are located within seven miles of
McClellan

- Palomar Airport (see map 3 ). Another eight companies are located within 14 miles of the Airport. A total of 28 of the 35 largest companies in San Diego County are
located closer to
McClellan

- Palomar Airport than they are to San Diego International Airport. This business travel
demand would be better met at McClellan

- Palomar Airport

– but that will take non

- stop service to the specific points of demand for those businesses, which includes the Bay Area, Phoenix and Las Vegas.

C alif ornia Pa cific Airlines has committed $25 0,000 in direct cash to this strategic plan. Additionally, the County of San Diego has committed $150,000 in direct cash to match federal
funds. McClellan

- Palomar Airport is seeking a Small Community Air Service Development Grant 

### MAP 3 : Location of San Diego County’s Top Employers Source: County of San Diego; May 2012McClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 26

in the amount of $500,000 as the federal share of the project. Alt ogether, local funding, already committed, makes up 44% of the overall project cost.

The entire funding of the program will be focused on marketing and advertising projects to support expanded service, specifically, at McClellan

- Palomar Airport

. One goal of the marketing and advertising campaign will be to convert Carlsbad catchment area passengers from users of the San Diego International Airport to user s of the McClellan

- Palomar Airport. This part of the campaign will focus on north San Diego County.

The second goal of the campaign will be to bring out

- of

- market travelers to San Diego County into the region through McClellan

- Palomar Airport. The Airport will focus the out

- of

- market advertising on the five markets listed in this application: Oakland, S an Jose, Sacramento, Las Vegas, and Phoenix. The campaign will highlight the convenience of McClellan

- Palomar Airport in relation to sites to visit and major company locations in northern San Diego County. The campaign will also focus on the convenience of new non

- stop service on California Pacific. This strategic plan is unique in that it has the potential to create a large number of new jobs in
the Carlsbad area

– many more new jobs than most other proposals. Because the airline will be using the McClellan

- Palomar Airport as its base of operations, it already employs a full headquarters staff
wi thin a few miles of the Airport. That staff currently numbers almost 100 employees. California Pacific Airlines
will have an estimated $90 million
annual economic co ntribution to the North County e conomy. This figure is projected to grow to over $200 mi llion by the Airline’s fifth year of operation.
Once the airline is up and running
, CP Air will employ over 150 people (see figure 19 ). Employment is forecast ed to grow to more than 500 people by year five, creating many new jobs in North County.

The proposed implementation timeline for the project assumes the Department of Transportation will award Small Community Grant Funding in September 201 2 (see figure 20 on next page )

. Once the award is announced, McClellan

- Palomar Airport will enter into a se rvice agreement 

### FIGURE 19 : Projected Job Growth at California Pacific Airlines Source: California Pacific AirlinesMcClellan

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## 27

with California Pacific Airlines, providing detail on the marketing plan

. Based on CP Air’s timeline for certification and service start, McClellan

- Palomar Airport expects flights to begin in the fourth quarter of 2012.

Once service is announced and schedules are published, the Airport will begin marketing the
new route s and working with California Pacific Airlines to monitor advance bookings. Once service begins, t he Airport will continue its marketing program and continue to work with the new carrier to monitor the route s

. T hroughout the proposed two year term of the minimum revenue guarantee
, t he Airport will submit grant status reports on a quarterly ba sis to the Department of Transportation

.

If, for some unforeseen reason, service is not commenced in a timely manner by C alif ornia Pacific Airlines
, McClellan

- Palomar Airport proposes to use federal grant money awarded under the Small Community Air Servic e Development Program to promote service on other carriers that can provide connections to a large origin and destination market in the West, or connectivity through a large hub. T he Airport will continue its discussions with all other airlines that can
p rovide additional seats to strong markets

.

Since the community has never before received a Small Community Air Service Development Grant, it will have no limitations on which new hub the DOT could fund. Among the options are Alaska Airlines/Horizon Air service to San Jose or Sacramento; Delta service to Salt Lake City; US Airways service to Phoenix; Frontier Airlines service to Denver; and/or United service to Denver. The Airport will not, however, be limited by this list of potential destinations, as the landscape for service could change before the Grant is awarded. 

### FIGURE 20 : Grant Implementation Timeline Source: McClellan

- Palomar AirportMcClellan

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## 28

PUBLIC/PRIVATE PARTNERSHIP

McClellan

- Palomar Airport consistently work s with community organizations, area businesses, and other government agencies on air service development projects. Many local partners have committed to work with the Airport to promote and market the new service under this application . The Airport and the County will manage and coordinate the marketing program in partnership wit h Grant partners

.

Major partners are listed below, with profiles of their organizations. Other, smaller partners, including many area businesses, will also work with County Airports to promote and support additional local air service, beyond the major organizations listed below.



### California Pacific Airlines
California Pacific Airlines (known as “CP Air” and “California Pacific”) is one of the cash partner s in this Small Community Air Service Development Grant prop osal, making a commitment of $25 0,000 in direct marketing money. The Airline already leases space at McClellan

- Palomar Airport, paying monthly terminal fees for a ticket counter and office space. The Airline is committed to its partnership with the Airport.

The Airline will work up to a fleet of four pure

- jet aircraft, Brazilian

- built Embraer 170s. The Embraer is a 70

- passenger, twin

- engine, which will be the quietest jet aircraft (Stage 4) to fl y out of Palomar Airport. The a ircraft has a 1,550

- mile range off the short runway at McClellan

- Palomar Airport. With a 2

- by

- 2 configuration, the aircraft will have no middle seats and will be designed with the local business traveler in mind

.



### San Diego North County Economic Development Council The San Diego North County Economic Development Council has a mission to grow and sustain the economy of San Diego ’s North County through attraction, retention and new business development. The group is a m ember

- driven coalition of the private and public sectors working together to sustain and carefully grow the economic base of San Diego’s North County

. The Group’s main goal is to market the area internally and externally in an effort to retain and
attract quality businesses and create additional, higher paying jobs. The San Diego North EDC
works with businesses, chambers of commerce, health organizations, local governments and educational institutions to improve the quality of life and economic sustainabil ity of NorthMcClellan

- Palomar Airport • Small Community Air Service Development Grant Proposal • June 11, 2012 

## 29

County. The EDC also undertakes initiatives to establish North County as a "business

- friendly" region and promote a regional approach to marketing North County as "San Diego's S mart Place to Grow" a business.



### San Diego North Chamber of Comme rce The San Diego North Chamber of Commerce is the steward for business in the region’s communities , supporting businesses of every size through proven programming, a unified voice in front of government, and dedicated committees. Strong support from membership allows the Chamber to thoroughly focus on each individual community while providing the benefit of a regi onal Chamber of Commerce.

The Chamber has three main areas of focus:
1. Business Development

– To identify and promote policies and programs that allow companies to invest in the region either through retention or expansion

. 2. Workforce Development

– Provide a regional workforce that is capable and competent through collaboration with business and education.
3. Infrastructure

– Develop and implement strategies to ensure regional capacity in six business

- critical categories: water, housing, energy, transportation, economic competitiveness and environmental stewardship.



### Carlsbad Chamber of Commerce With more than 1,600 member businesses employing 65,000 or more, the Carlsbad Chamber is the second largest chamber in San Diego County and the 10th largest in California. It truly is an influential force for the region’s business community. It’s important to note that the Carlsbad Chamber is independent from government. The Chamber receive s no operating funds from the
C ity of Carlsbad or any o ther government agency.



### San Diego North Convention and Visitors Bureau (CVB) The San Diego North Convention and Visitors Bureau is a full

- service organization providing information and assistance to the region's tourism and hospitality industries, including the areas of La Jolla north to Oceanside, Rancho Bernardo north to Fallbrook, Julian and the Anza

- Borrego Desert. The CVB works closely with its members to promote San Diego North as a premier, year

round resort destin ation, including McClellan

- Palomar Airport

.



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## 33McClellan

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## 34McClellan

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## 35McClellan

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## 36McClellan

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## 37McClellan

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## 38

CONCLUSIONS

North San Diego County ranks as one of the most underserved catchment areas in the country. There is less than one

- tenth of one available airline seat per resident of its catchment, which is home to 1.1 million. Capacity in the region continues to be squeezed

– with total regional airline seats down almost a quarter in the last three years. Subsequently
, fares are up

– sitting at their highest point in a decade.

The air service story in Carlsbad is punctuated by the fact that the flight reductions have also had the impact of drastically increasing the catchment area’s passenger “leakage” to other airports in Southern California. The Airport retains just 1.6% of its local passengers. It loses more than 4,400 passengers per day each way to other airports in the region

– a more critical situation in San Diego County than in almost any other part of the country, due to the heavy congestion on virtually all freeways in and out of Carlsbad, at virtually all times of day.

But
, unlike other no n

- hub airports, McClellan

Palomar Airport doesn’t simply leak passengers who are looking for lower fares. Most Carlsbad passenger leakage happens due to passengers looking for more convenient flight options

– more non

- stops to their destinations on larger jet equipment. These passengers will often pay more for convenience. It is these passengers the Airport and its partners are targeting in this application.

The Airport has developed a wide ranging community coalition to support the launch of California Pacific Airlines, with service to five regional destinations that are among the largest markets from north San Diego County. The Airline, itself, has pledged $250,000 in cash to this project, while San Diego County has pledged $150,000. A total of 44% o f the project cost will come from local cash, with $500,000 coming from the Department of Transportation.

McClellan

- Palomar Airport has never been awarded a Small Community Air Service Development Grant. It has put together its most wide

- ranging coalitio n for this application, in hopes of an award in 2012. 

## “ The Airport has developed a wide ranging community coalition to support the launch of California Pacific Airlines...”