### PROPOSAL UNDER

THE SMALL COMMUNITY AIR SE RVICE DEVELOPMENT PROGRAM

DOCKET DOT- OST- 2010-0124

GREATER NAPLES FLORIDA METR OPOLITAN STATISTICAL AREA

CITY OF NAPLES AIRPORT AUTHORITY

DUNS 092230952

CONGRESSIONAL DISTRICT – FL-014

City of Naples Airport Authority Naples Municipal Airport

160 Aviation Drive North Naples, Florida 34104 Phone: (239) 643-0733 Fax: (239) 643-4084

Email: administration@flynaples.com

### Introduction

The Naples Municipal Airport’s Air Service De velopment Program is centered on three key objectives:

✈ To re-establish reliable scheduled air serv ice to a major hub through an airport-airline

business model

✈ To create a self sustaining air service pr ogram within twelve months of inception

✈ To develop a strong advertis ing and marketing campaign with the assistance from airport and local community resources

The Naples Airport Author ity is requesting a grant of $280,000 to cover one-half of the purchase of common use airline equipment and one third of the marketing and advertising costs over a two year period. The Napl es Airport Authority is reques ting only a portion of the cost needed to secure our goals rather than the tota l cost. This ensures the commitment and initiative that the Naples Airport Authority and the community has to esta blish and sustain successful air service in our community.

The Naples Municipal Airport is the only fully certificated Part 139 airport in Collier County, Florida, and is ready to support scheduled ai rline service to our community at its first opportunity. The Naples Airport Authority is a financially sound government agency focused on serving our community’s needs. This service is the number one goal of our Authority Board.

The City of Naples Airport Authority respectful ly requests the Secretary’ s favorable approval of this Small Community Air Service Development Program Grant proposal.



### Synopsis of the Community’s Historical Service

The Naples Municipal Airport provided continuous scheduled air service from 1957 through 2003, functioning as a non-hub airpor t with direct service to Mi ami, Orlando, Tampa and Key West. From FY 2000 through FY 2004, the amount of commercial passenger traffic declined by

94% due to the loss of American Eagle in 2001 and the total loss of scheduled commercial service in FY 2003. During 2004, only seasonal service was ava ilable to Miami and Key West on nine passenger aircraft.

From November 2004 through September 2007, Delta Connection provided scheduled air service with three flights per day to and from Atlanta with 40 passenger regional jets. Delta’s passenger load factors (number of passengers divided by the number of seats per flight) were over 70% which was high for new service and their revenue resulted in the $1 million community backed revenue guarantee not being used . However, despite the high load factors, Delta terminated service from Naples as of October 1, 2007 due to aircraft fleet utiliza tion issues and capacity

issues at Atlanta.

Scheduled air service to Tampa was provided by Gulfstream (Continental Express) for a brief period in 2008, and scheduled air service to Ke y West was provided by Cape Air until April

12006 and resumed by Yellow Air Taxi from Fe bruary 2007 through October 2008. Yellow Air Taxi added service to Ft. Lauderdale in early 2008, and stopped all se rvice in October 2008, when they went out of business following several accidents.

The availability of service drives the response ofpassengers at Naples, as the demand is everpresent. The market responded to a service hi gh of seven airlines in 1995, generating 173,802 passengers – more than the population of the Napl es – Marco Metropolitan Statistical Area at

that time! It is not the Naples community that has failed the airlines. The airlines have failed our community.

The following chart depicts the total passengers and number of airlines from 1990 through 2008:

The following table depicts passenger enplanemen ts for direct airline destinations from 1990 through 2008:

Destination 1990 1995 2000 2005 2006 2007 2008

Miami 13,256

22% 41,928

49% 39,768

67% Tampa 30,472

50% 19,768

23% 11,502

19% 1,680

57%

Orlando 17,585

28% 18,823

22% 2,876

5% Key West 5,442

6% 5,600

9% 4,559

15% 1,554

6% 822

4% 1,247

42%

Atlanta 25,457

85% 25,004

94% 18,013

96% 19

1%

2The public’s response to the Delta service from Naples to Atlanta (2004 – 2007) proved that our community wants and expects scheduled air serv ice at the Naples Municipal Airport. Our history also shows that the more direct connections to multipl e hub airports increase the more rapidly our passenger tr affic grows (1990 – 2000).



### Description of the community’s existing air service

As stated above, the Naples Muni cipal Airport lost al l scheduled air servic e in October 2008. The Authority’s Executive Director and the Fly Na ples Team have been working diligently on securing scheduled air service with an airlin e offering a credible bu siness plan. One of the Executive Director’s goals, as set by the Board of Commissioners is “Work aggressively to regain schedule commercial air service.”

As mentioned in the Introduction, the Naples Municipal Airport is a fully certific ated Part 139 commercial service airport. We have maintained our relationship with the Transportation Security Administration (TSA) and have been assured that once an airline has committed to scheduled commercial air service at Naples; th e TSA will be ready to move their staff and equipment back into the Commercial Airline Terminal in a timely manner. The TSA currently maintains office space at the airport.

The Commercial Airline Terminal is located in the South Quadrant of the Naples Municipal Airport and consists of 21,190 squa re feet with 5 gates and 540 au to parking spaces. There is one restaurant, four rental car companies, and only one aircraft charte r company operating out

the Terminal.

The Authority understands that expenses incu rred prior to the awar d of a grant are not

reimbursable.



### Description of the community’s air servi ce development efforts and the results of those efforts

With the loss of the airport’s major carrier in 2001, the Board of Commissioners appointed one of its members as the Air Service Liaison to prov ide formal Board presence in meetings with air carrier representatives. Further losses of air service during 2002 and 2003 prompted the call to the community and key business organizations to fo rmally join the effort. In 2003, a partnership of public and private agencies, the Fly Naples Team, the first of its kind in the metro area, was established in support of air servi ce development at the airport.

Authority staff members, along with the Air Serv ice Liaison, met with ai rline route planners. From 2001 through today, Authority staff members and the Air Serv ice Liaison have had dozens of face-to face meetings with “legacy” carriers, as well as start-up carrie rs interested in new markets. The Fly Naples Team assisted with hosting visiting airline repr esentatives by providing free accommodations, meals and other amenities an d by meeting with the representatives and “selling” our community and our need for air service.

3Since being formed, the Fly Naples Team launched a very successful effort to bring the first interstate regional jet service to Naples. Th is was accomplished because these organizations realized that by working together as a “Team” (through marketing and adve rtising) this goal could be accomplished. The Airline Incentive Program was expanded to include not only a waiver of all landing, common use and rent al fees, but complete ground handling support services. The addition of ground handling servic es provides a significant cost savings for airlines. In order to support this incentive, th e Authority hired staff, purchased equipment and provided airline specific training to all ramp serv ices personnel. The estimated annual cost of this incentive was $400,000—a significant expenditu re for a small airpor t. In June 2004, the Authority finalized a revenue an alysis and revenue guarantee prog ram which was offered to the first airline providing reasonabl e jet and/or turbo-prop service to a Southeastern hub. Delta Airlines agreed to enter the Napl es market in 2004 in exchange fo r a two-year revenue guarantee.

The success of the Delta service was a result of aggressive marketing of the new service during the launch period and continued marketing and promo tion of the service to local residents, local business travelers, and travel/tourism promoters. Several events, both pub lic and private, were held in Naples to celebrate and market the ince ption of Delta service to Atlanta. The Authority focused on local print and radio marketing a nd public speaking, the C onvention and Visitors Bureau focused their portion of the marketing on locations where our visitors live, and Fly Naples Team members focused on persona l marketing to the community.

During the time Delta was operating, the Author ity continued to market for additional

commercial air service and was su ccessful in attracting Yellow Ai r Taxi with service to Key West, a popular get-a-way destination that was pr eviously served by Cape Air from Naples. The Authority continued to provide marketing s upport for Yellow Air Taxi, however, Yellow Air Taxi pulled out of Naples in October 2008, follo wing several aircraft accidents and the carrier declaring insolvency protecti on under Chapter 7.

The Authority and the Fly Naples Team continue to work to secure scheduled air service to a major hub in an effort to support the community’s desire for air service from Naples. Beginning in 2009 - 2010, we expect to serve over 106,000 passengers to and from our community.



### Description of the community’s air service needs or deficiencies

A 2006 passenger demand analysis pr epared by Mead & Hunt report ed that Naples is a rapidly growing catchment area with population estimated at approximately 340,000. “It is an affluent area capable of and willing to pay above average ai rfares. The Naples area is a popular leisure market destination for discriminating visitors from the Upper Midwest, Northeast, and MidAtlantic population centers who are seeking the less commercial ized natural attractions of

Florida. This combination of f actors has created an estimated air travel true market potential of over 2.3 million origin and destination passengers.”

The latest report by the U.S. Department of Commerce’s Bureau of Economic Analysis shows Naples-Marco Island ranked second in the coun try for personal income. The report shows a 1.7

4percent increase from 2007 to 2008. This data repr esents the financial strength of our community that, in turn, will sustain st rong commercial air service.

A survey conducted by SEA Polling and Strate gic Design in November 2007 of 400 City of Naples registered voters showed that Naples wa nts more airport, not less. More than 70% of Naples residents fly more than three times a year with more than 50% flying more than five times a year. Of those polled:

✈ 63% said that it was important to o ffer passenger service out of Naples

✈ 73% would use the airport more if a g reater variety of flights were offered

✈ 92% identified location and convenience of the airport as important when flying

Based on the FY 2000 passenger levels, Naples Muni cipal Airport has the pot ential to serve over 120,000 passengers from our local community.

The Naples community would be best served wi th service to several hub airports such as, Atlanta, Charlotte, Miami, Orlando or Tampa.

In order to best serve thos e hubs, the Naples Airport Aut hority has budgeted $4 million to increase the take off length of it s primary runway to better serve a nd attract regional jet service at Naples. This project will enhance the performance and load factor for regional jet aircraft. In turn, this will bring a high percentage of pr ofitability and sustainability to the airline.



### Strategic plan for meeting those needs under the Small Community Program

New route service is very ris ky for airlines, especially in view of the current economic conditions, and while a revenue guarantee does, in the airlines’ view, m itigate this risk, the Authority and the Fly Naples Team are not supportive of a revenue guarantee after our experience with Delta. We believe that by pr oviding complete support services, including personnel, equipment and marketing, a significant amount of risk has been alleviated for the airline, and probably more so th an with a revenue guarantee.

As stated in the Introduction, the Naples Munici pal Airport’s Air Service Development Program

is centered on three ke y objectives (goals):

✈ To re-establish reliable scheduled air s ervice to a major hub through an airportairline business model

✈ To create a self sustaining air service pr ogram within twelve months of inception

✈ To develop a strong advertising and mark eting campaign with the assistance from local community resources

5Our first goal is to re-establish reliable sc heduled air service to a major hub through an airport-airline business model which includes:

✈ Above wing services (counter and ticketing personnel)

✈ Below wing services (g round handling personnel)

✈ Common use passenger processing (board ing passes, bag processing, etc.)

✈ Ground service equipment

✈ Fee waivers (rent, landin g fees, background checks)

✈ Security requirements (local law enforcement)

✈ Marketing and advertising support

Above and Below Wing Services : The Authority has been providing below wing services to

the air carriers and has found this to be an e ffective way of providing cost savings to the air carrier while utilizing Authority personnel effec tively. We plan to incr ease this support by also providing above wing services with Authority pe rsonnel, thereby decreasing one of the highest operating costs for air carriers.

Common Use Passenger Processing : The common-use standard, dating back to 1984, has not been updated in many years. Additionally, a prol iferation of different providers and their respective platforms and/or implementation met hodologies made support of airline applications and airport environments difficult. Our goal is to implement a common system platform that reduces the support costs and enables integration with other airport systems such as flight information display. Once implemented, it will pr ovide the incentives such as a computerized passenger handling system that is adaptable to all airlines, more effective and efficient utilization of existing counter space and management of the total system by Authority personnel.

The advantages of common use equipment and personnel are significant. The equipment purchased by the Authority would be used more frequently than if owned by one carrier, plus there would be a huge reduction in th e initial capital outlay that an ai rline has to make in order to start up service. Airport staff is already cross trained to work in several areas, therefore increasing staff productivity.

The Authority is in the process of issuing a Reque st for Qualifications and Statement of Interest for a company to design and build this system. We understand that any expenditure made before the award of the grant is not eligible for reimbursement.

Ground Service Equipment : As stated above, the Authority has been providing below wing services to the air carriers and therefore has most of the equipment (tugs, baggage carts, and ground power units) on hand and ready to go. Dependi ng on the aircraft used by the airline, we anticipate purchasing a loading br idge and an air-start unit.

Fee Waivers : The Authority will continue to waiv e all rents, landing fees, and background check fees for the airline during the fi rst twenty-four mont hs of service.

6Security Requirements : The Authority will continue to be ar the costs of providing local law enforcement personnel required for ai r carrier operations. It is not clear at this time if the Authority will be able to re ceive any reimbursement on any portion of these costs through the

TSA.

Marketing and Advertising Support : Our marketing and advertis ing plan that was used to launch and support the previous Delta service was ve ry successful. As with Delta, a variety of advertising and promotional efforts will be us ed: special events, print, display and radio advertising, public speak ing, and personal efforts by the Fly Na ples Team. Costs for marketing and advertising support will be provided by the Au thority with the assistance of grant proceeds and the Greater Naples, Marco Island and Ev erglades Convention and Visitors Bureau.

This Airline Incentive Program will make air line operational costs at the airport almost nonexistent, eliminating or reducing start up operational costs and significantly improving overall operational efficiencies. Having personnel and equipment readily available at no cost to the carrier makes the airport more marketable to ai rlines considering starting new service in our community.

The type of air service and the timing of air service start-up are critical. To qualify under this program the airline must have a Part 121 or Pa rt 135 (with scheduled service waiver) Operating Certificate, provide year-round se rvice to a major hub, and provide connecting service from the major hub or have interline agreements with a carrier operating from the major hub. To be successful, the commercial air service would need to start no later than November or December in order to take advantage of our seasonality. A two to three month lead time before service commenced would be necessary to properly promote the availability of service both locally and in regions where our visitors reside.

Our second goal is to create a self sustaining air service progr am within twelve months of inception.

During the initial twelve month start up period, the flying pub lic will become aware of the Naples service and begin using this service on a re gular basis. This will be especially true as it relates to travelers booking their own flight throu gh various internet web pa ges, such as, Expedia and Travelocity. They will know to check for fli ghts originating or ending in Naples, instead of Ft. Myers, Tampa, Miami or Ft. Lauderdale, and therefore save anywhere from 1 to 3 hours of travel time to or from the airport. They will enjoy hassle-free security, and know that they will have smooth-connection boarding and baggage tran sfers at hub airports dur ing their air travel experience. They will also be awar e that while ticket prices from Naples are a bit higher, the free parking and convenience is well worth it.

Also during the twelve month star t up period, the airline will become assured that Naples service is viable and a money maker for them. We know from discussions with various airlines, that they would consider a per turn fee for the services offered by the Authority (full staffing and equipment support).

7Our third goal is to develop a strong advert ising and marketing campaign with assistance from local community resources.

As stated above, our marketing and advertising plan that was used to launch and support the previous Delta service was very successful and will be used for this project. The target

audiences for the new service will include comm unity residents, community business travelers and travel/tourism promoters. The community residents plan is designed to reach the community along the Marco Island-Naples corridor . Travelers would find it a great convenience to use the commercial service at Naples rather than driving to the east coast of Florida or driving I-75 North to fly from Ft. Myers. Even residents that do not trav el often have an interest in knowing that scheduled commercia l service is provided within their community so they can inform their out-of-town family and friends when coming to visit. The community business travelers plan is designed to reach local businesses. Due to the frequency of travel, business

travelers stand to benefit most fr om the new service. They valu e the time savings of flying out of the local airport, and appreciate the conveni ences of free parking, hassle-free security and smooth-connection boarding and baggage transf ers from the connecting hub airport.

The travel/tourism promoters plan is designed to reach the flying public that use these services. Travel agents and ot her tourism promoters are happy to tout Naples Municipal Airport as a more convenient alternative for Naples area tr avelers. They also find the benefits of free parking, hassle-free security and smooth-connec tion boarding and baggage transfers at the hub airport beneficial for their clients. They are influential advocates for the airport if they are aware

of the scheduled commercial service. As with Delta, a variety of advertising and promotional efforts will be used: special events, print, display and radio advertising, public speaking, and personal efforts by the Fly Naples Team.



### Description of any public-private partne rship that will participate in the project

The Authority understands that in order to be su ccessful in re-establishing scheduled air service and to ensure the sustainability of the service, the strong support and commitment of key business organizations is essentia l. In 2003, a partnership of public and private agencies formed the Fly Naples Team with one goal: to strongl y support air service development at the Naples Municipal Airport for the benefit of the community.

Members of the Fly Naples Team include, but are not limited to:

✈ City of Naples Airport Authority

✈ Greater Naples Chamber of Commerce

✈ Economic Development Council of Collier County

✈ Greater Naples, Marco Island and Evergl ades Convention and Visitors Bureau

✈ Collier County Lodging Association

✈ Friends of the Naples Municipal Airport

✈ Private Citizens

8The FLY NAPLES TEAM launched a ve ry successful effort to bring the first interstate regional jet service to the Naples community in 2004. They worked with various tourism and trade groups as it was realized that air service to and from our community had significant economic impact on the local Naples economy.

The FLY NAPLES TEAM members, a public-private partnership, will continue to participate in the project. The Team, under the general guidance and direction of the City of Naples Airport Authority’s Executive Director, wi ll provide overall community out reach and support, as well as general guidance toward the project.

Below is a summary of the role that each organi zation will play and specific responsibilities they have toward the implementation of the project:

City of Naples Airport Authority will provide oversight, guidance and direction to the FLY

NAPLES TEAM members. Its specific responsibilities in implementation of the project are:

✈ Overall administration of the operational elements of the project will be provided by the Operations Manager-Commercial Terminal & Security.

✈ Fund administration will be provided through the Finance Department under the

direction of the Dire ctor of Finance.

✈ Planning and Implementation will be provided by the Operations ManagerCommercial Terminal & Security.

The City of Naples Airport Authority is the lead partner on the FLY NAPLES TEAM and it will have sole administration and oversight of all gr ant funding and coordination of all air service marketing/advertising activities. The Authority w ill continue to use a significant portion of its communication budget to support commercial airlin e awareness. The Fly Naples Team has hosted several visiting airline repr esentatives over the last severa l years and will continue to do so. The Fly Naples Team will continue to work closely with the Authority to attract and retain

an air carrier and assist in additiona l marketing and adve rtising strategies.

Greater Naples Chamber of Commerce has stated, as one of its goals, to support business growth and business retention in the Naples area . The Chamber supports air service efforts via its direct mail publication, whic h is distributed to more th an 2,000 chamber members and the lucrative business travel market they support. In addition, the Greate r Naples Chamber has a state of the art, multi-million dollar visitors’ center that provides advertising and rack displays, as well as internet advertising.

Economic Development Council of Collier County has specifically targeted aviation/transportation infrastructure as one of its key focuses for the Naples area. The EDC supports air service initiatives by assisting with marketing and demographic research.

Greater Naples, Marco Island and Everglades Convention and Visitors Bureau will provide out-market advertising support to include coop erative promotional opportunities through its relationship with Visit Florida, th e Official State Tourism agency.

Collier County Lodging Association will assist with promotional venues and opportunities.

9Friends of the Naples Municipal Airport serves as an important community goodwill ambassador for the airport and promotes the valu e of local air service via member involvement in numerous business and civic organizations. Th e Friends host tours and the community’s only Aviation Day/Airport Open House, which brings thousands of local residents (and potential air travelers) to the air port and the region.

Private Involvement – In 2004, over fifty companies/organi zations and individuals provided

financial commitment in the form of a Revenue Gu arantee to establish reliable air service.



### Detailed description of the funding necessary for implementation of the community’s project, including the federal and non-federal contributions

Airport Contributions (2 years)

✈ Personnel (above and below wing) $1,612,000

✈ Rent Abatement 275,000

✈ Marketing and Advertising (66% match) 200,000

✈ Ground Support Equipment and Refurbishment 200,000

✈ Landing Fee Abatement 150,000

✈ Common Use Passenger Processing System (50% match) 180,000

✈ Common Use Airline Equipment Support (1 year) 100,000

✈ Security Requirements 60,000

✈ Additional Insurance, Lega l Fees, Miscellaneous 60,000

✈ Special Events 20,000

Airport Contributions Subtotal $2,857,000

Fly Naples Team Support (2 years)

✈ In-Kind Advertising $100,000

Fly Naples Team Support Subtotal $ 100,000

Small Community Air Service Grant (2 years)

✈ Common Use Passenger Processing System (50% match) $180,000

✈ Marketing and Advertising (33% match) 100,000

Small Community Air Service Grant Subtotal $ 280,000

Total Program Proposed Cost $3,237,000

1011 

### Explanation of how the community will en sure that its own funding contribution is spent in the manner proposed

The Authority will take the lead in monitoring th e expenditures for this program. Authority staff has extensive knowledge in maintaining projec t budgets and controlling expenditures. The Authority’s financial commitment will be publis hed in the Authority’s annual Operating and Capital Budget and reported in the Authority monthly financial reports to the Board of

Commissioners.



### Description of how the community will mo nitor the progress of the grant project

The Authority will review actual enplanement and load factor data on a continuous basis and provide this information to the Board of Comm issioners and the Fly Na ples Team on a monthly basis. The Fly Naples Team will seek customer feedback on marketing efforts and may conduct surveys or focus groups to test advertising effectiveness.

Critical milestones that must be met in order to succeed:

✈ Load factors of 70% or greater needed during “season” (January – April)

✈ Initial scheduled air service must commence no later than November to allow ample time for marketing and promoting the new service

✈ A minimum of 3 – 5 flights per day w ith connecting servic e at hub airports

The Authority will continually monitor thes e milestones and work with the airline representatives to meet these milestones.



### Description of how the community plans to continue with the project if it is not self sustaining after the grant award expires

At stated earlier, the Authority is committed to making scheduled air service successful and will continue to offer the fee waivers, and provide above-wing equipment and staff, ground handling equipment and staff, and marketing support for ca rriers providing year-ro und service to a major

hub.



### Designation of a legal sponsor res ponsible for administering the program

The City of Naples Airport Authority, operator of the Naples Municipal Airport, will serve as the legal sponsor of the grant. The City of Naples Airport Authority (the “Authority”) was created under Laws of Florida 69-1326, as amended, as an independent authority responsible for the operation of the airport located in Naples, Florida, or any other airport in Collier County, Florida, which the Authority may contract to operate. The Authority’s Ai r Service Development Program, outlined in this grant proposal, will be administered by the Executive Director.