Docke t DOT-OST-2012-006 9



## Applicatio n unde rth e Smal l Communit yAi rServic e Developmen t Gran t Progra m o f 

# Montros e Regiona l Airpor t Montrose , Colorad o Under 49 U.S.C. 41743

etseg

DUN S #07647107 7 EI N #84600078 7 Colorad o Congressiona l Distric t # 3 Lega l Sponsor : Montros e Regiona l Airpor t

# = MontroseRegiona l Airport 210 0 Airpor t Road » Montrose , C O 8140 1 » (970 ) 249-320 3 * FA X (970 ) 249-280 8 

### June 8 , 201 2 Departmen t

o f Transportatio n 40 0 7 t h

### Street

S W Washington , D C 2059 0 Attention : Aloh aLe y

Associate Director , Departmen t o f Transportatio n Subject : Applicatio nunder th e Smal l Communit y Ai r Servic e Developmen t

Program Montros e Regiona l Airport , Montros e County , Colorad o Docke t OST-2012-0069 , DUN S 076471077 , ET N84600078 7 Montros e Regional Airpor t recentl y underwen t

atermina l expansio nandrenovatio nt o accommodate growin g enplanement s due t o ou r region' s ai r

guarantee program . Revenu e guarantee s currentl y i nplac e ensur e ai r servic e t o ou r

region . Althoug hthe y ar e no t sufficien t

t o offse t hig hticke t

price s o r provid e ai r servic e fro mth e westernUnite dStates . Thi s grant woul dallo w ou r

regio nt o expan dai r

servic e t o includ e acces s t o th e westernUnite dStates . Montros e Regiona l Airpor t (MTJ ) has tw o runways . Our primar y runwa y i s 17-35 . Thi s runwa y i s 10,00 0 fee t

lon g and15 0 wid e wit ha nInstrumen t

Landin g Systemo nrunwa y 17 . Our secondar

y runwa y i s 13-3 1 wit halengtho f 750 0 fee t

andwidt ho f

100 feet . Bot hrunway s hav e hig hintensit y runwa y light s whic har

e pilo t controlled . I naddition , w e hav e aVOR-DM Eandrotatin g beacon . Give nthi s opportunit y t o improv e ou r ai r service , w e hav e submitte dth e followin g proposal that include s agrant

reques t o f $500,00 0 fo r

you r consideration . W e believ e i t wil lb e aproductiv e us e o f funds , accomplishe s th e inten t o f th e SCAS D program , an dwil lbenefi t no t onl y ou r communit y bu t

ou r entir e regio nthat

include s th e town s o f

Telluride , Ouray , Ridgeway , andDelt aa s well . W e hop e yo u fin dou r Airpor t deservin g o f

agrant .

Lloyd ^ D . Arnol d Directo r o f Aviatio n Montros e Regiona l Airpor tProposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

# Proposa l Outlin e Montros e Regiona l Airport , i n partnershi p wit h th e Tellurid e Montros e Regiona l Ai rOrganization , herei n submit s it s proposa l fo rfund s unde rth e 201 2 Smal l CommunityAi rServic e Developmen t Gran t Program , Docke t OS T2012-0069 . 

### Majo rServic e Deficiency : Westboun d Acces s Montros e Regiona l Airport (MTJ ) i s th e mai n ai rservic e gatewa yfo rth e centra l Wester n Slop e are a o fColorado . However , becaus e o fchange s i n th e structur e o fth e U S airlin e industry , th e regio n has n o rear-roun d acces s servic e t o th e Wester n Unite d States , an d al l acces s i s veryhig h fare . Excep t fo rapproximatel ythre e month s i n th e winte rseason , th e onl yacces s t o th e wes t i s vi a backtrackin g ove rDenver , an d servic e i s provide d byonl yon e airline , United , operating 50 - seat regiona l jets. 1 Whil e highl yreliable , an d verymuc h appreciate d byth e Montros e community , th e Unite d servic e t o thei rDenve rhu b has veryhig h loa d factors , resultin g i n difficult yfo rconsumers t o ge t t o th e west , an d experiencin g hig h fares . 

### Objectiv e o fTh e Gran t Thi s gran t i s intende d no t onl yt o brin g ultimatel yyear-roun d nonsto p servic e t o th e U S West , bu t als o brin g a low-far e carrie rt o th e Wester n Slope . Th e Airpor t an d th e Communityhav e identifie d an d have bee n i n substantiv e contac t wit h potentia l airline s wh o expresse d interes t i n partnerin g wit h Montros e i n establishin g affordabl e nonsto p ai rservic e t o th e west. 2However , a mi xo frevenu e offset s ar e needed , and/o r (dependin g o n th e specifi ccarrier ) significan t marketin g support t o assure tha t servic e i s successful . 

### Th e Gran t I n thi s application , th e Airpor t an d th e Communit yar e requestin g a gran t o f$500,000 , t o b e matche d wit h $100,00 0 i n loca l dollars , t o provid e a revenu e guarante e an d marketin g fundin g t o support th e ne wservice . Th e gran t i s intende d fo ra tw o yea rperiod . 

### Sponsorshi p Th e Montros e Regiona l Airpor t i s th e officia l sponso ro fthi s gran t application . Th e Tellurid e Montros e Regiona l Ai rOrganizatio n wil l b e responsibl e fo rth e communit y participatio n i n th e gran t administration .

1 I n th e 2011-201 2 winte rsk i season , th e Tellurid e Ski Are a an d th e Tellurid e Montros e Regiona l Ai rOrganizatio n wer e abl e t o recrui t SkyWest int o th e LAX-MT J market , bu t du e t o reduction s i n R J fleets , thi s seasona l servic e mayb e problemati ct o recrui t i n th e future . Thi s gran t i s focuse d o n sustainable , lo wfar e access . 2Pleas e se e th e lette ro fsupport fro m Allegian t Airline s i n th e appendi xo fthi s application . Docke t DOT-OST-2012-006 9 Pag e 2Proposa l o fMontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t



### Contac t Informatio n Al l correspondenc e regardin g thi s proposa l shoul d b e referre d to : Lloy d D . Arnold , CM . Directo ro fAviatio n Montros e Regiona l Airport Montrose , Colorad o 970-249-343 3

Docke t DOT-OST-2012-006 9 Pag e 3Proposa l o fMontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

# Tabl e o fContent s PROPOSA L OUTLIN E 2 Majo rServic e Deficiency : Westboun d Acces s 2 Objectiv e o fTh e Gran t 2 Th e Gran t 2 Sponsorshi p 2 Contac t Informatio n 3 

## 1 . TH E MT J MARKE T5 Geographi c Locatio n & Marke t Populatio n 5 Tourism : Economi c Engine . Hampere d B yLac k o fWester n Acces s 6 Curren t Servic e Pattern s 7 Seasonality7 Histori c Traffi c B yYea r8 Ai rFare s - Hig h 9 

## PLA N FO R GRAN TIMPLEMENTATIO N 1 0 Targe t Carrier s 1 0 Th e Progra m - AMi xO fRis k Abatemen t & Marketin g 1 0 

### Marketin g an d Advertisin g Progra m 1 0 Potentia l Fundin g Distributio n 1 1 Risk-Abatemen t 1 1 Marketin g Support Onl y1 1 Ensurin g Ne wRout e Sel f- Sufficienc y1 2

Docke t DOT-OST-2012-006 9 Pag e 4Proposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

# l.Th e larke t Geographi cLocatio n & Marke t Populatio n Montros e Regiona l Airpor t i s th e mai n gatewa yt o th e Colorad o Wester n Slope , an d serve s a residen t populatio n o fove r50,000 . I n additio n t o agriculture , th e regio n i s a majo rrecreationa l destination , an d a larg e resort industryi s dependen t o n Montros e Regiona l fo raccess t o an d fro m th e res t o fth e natio n an d th e globe .



# Montros e Regiona l Airpor t Primar yCatchmen t Are a

)fi9\0 - — Wort h dal e
Th e loca l populatio n bas e i s locate d alon g th e north/sout h U S 50/55 0 corridor , bordere d by Delta , Colorad o i n th e north , an d Ouray/Re d Mountai n Pas s t o th e south . I n additio n t o agricultur e an d recreationa l tourism , th e regio n has bee n attractin g interes t o fligh t manufacturin g industries . Th e additiona l ai rservice , whic h thi s gran t reques t ca n deliver , wil l b e

Docke t DOT-OST-2012-006 9 Pag e 5Proposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t a n enormou s boos t t o th e competitivenes s o fColorado' s Wester n Slop e withi n th e globa l economy. 3 

### Tourism : Economi cEngine . Hampere d ByLac k o fWester n Acces s Touris m an d recreationa l traffi ci s th e lifebloo d o fth e region . Analysi s o fth e traffi cflow s a t Montros e Regiona l clearl ydemonstrate s thi s dynamic : Psg ? c ' c Originatin g % o fPa x 1 IA H 14,67 0 16.06 % 8.18 % 2 DFW 12,65 1 15.46 % 7.05 % 3 DE N 11,22 4 32.3*4 6.26 % 4 EW R 10,20 9 13.25 % 5.69 % 5 OR D 10,17 2 20.81 % 5.67 % 6 LG A 8,53 4 23.15 % 4.76 % 7 AT L 7,54 6 14.45 % 4.21 % 8 AU S 5,09 6 15.95 % 2.84 % 9 BO S 4,62 4 27.01 % 2.58 % If l TP A 3,28 6 33.45 % 1.83 % To p 1 0 Total s 88,01 3 2004* 1 49.06 % Th e to p te n O& D destination s a t MT J ar e shown , alon g wit h th e tota l passenge rdeman d fo ryea r 2011 . Not e tha t onl y24.9 % o fth e passenge rtrip s ar e locally-originated . Th e remainde rar e visitor s comin g t o th e Wester n Slop e fro m othe rpart s o fth e nation . Thi s demonstrate s th e importanc e o fhavin g adequat e ai rservic e access t o th e region. 4 Th e destinationa l distributio n i s als o o fnote . Th e to p te n destination s represen t almos t hal fo fal l traffi ca t MTJ , ye t non e includ e an ymajo rcommercia l an d populatio n center s i n th e US west . Thi s i s simpl ybecaus e ther e i s n o year-roun d servic e t o thes e points , excep t vi a circuitou s connection s o n 50-sea t jet s ove rDenver . Eve n here , th e fare s ar e veryexpensiv e as well . I t i s agai n note d tha t becaus e th e traffi cbas e (an d economi cbase ) o fMontros e depend s o n visitors , no t havin g adequat e acces s t o th e wes t i s a majo rai rservic e deficiency . Furthermore , becaus e th e neares t airpor t wit h an ystron g level s o fservic e t o th e wes t i s Denve r- a si xhou r driv e i n goo d weather , an d a likel y8-hou rdriv e i n th e winte r- thi s are a o fColorad o i s essentiall y cu t of ffro m ai rservic e t o th e Wester n Unite d States . Th e botto m lin e i s tha t th e servic e tha t thi s gran t wil l make possibl e wil l ope n thi s regio n o f Colorad o (an d it s all-importan t recreationa l economy ) t o th e population s o fth e West .

3Recentl yth e Countywa s negotiatin g wit h aviatio n fir m fro m th e E U fo ra majo rmanufacturin g facilit y 4Source : US DOT-reporte d data , analyze d b yAviatio n DataMiner TM fro m Boyd Grou p International . Docke t DOT-OST-2012-006 9 Pag e 6Proposa l o fMontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t


### Pas t Servic e Pattern s

Winte rservic e pattern s (firs t quarter ) ar e significantl yhighe rtha n secon d quarte rpatterns . Thi s gran t wil l incubat e ne wservic e t o th e wes t tha t wil l balanc e ou t muc h o fthi s seasonality . Th e MTJ-LA Xi s i n plac e onl yo n week-end s i n th e winter , wit h smal l 50-sea t jets . Seasonalit y Th e natur e o fth e MT

J marke t drive s highl yseasona l traffi cdemand . Th e firs t quarte ro fth e yea r i s th e peak , wit h th e thir d quarte rrepresentin g a secondar ypeak. 5 

# viatio n
•DataMine r

60,000- , 73,13 5 6 0 000 - § 40 .000 4 S 2 0 000 - O & D Passenge rTren d 74,557 75,76 1 $287.28 1242.2 7

2009Q 2 2009Q

4 2010Q

2 2010Q

4 2011Q

2 $300.0 0 $250.0 0 $200.0 0 $150.0 0 $100.0 0 I- $50.0 0 $0.0 0 2011Q 4

5Source : Aviatio n DataMiner TM - fare s show n ar e averag e one-way , ne t o ffedera l fee s an d taxes . Docke t DOT-OST-2012-006 9 Pag e 7Proposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t On e o fth e objective s o fthi s gran t applicatio n i s t o establis h - eithe rinitiall yo ra t som e poin t afte rservic e i s begu n - year-roun d servic e pattern s t o th e West . On e o fth e targe t carrier s wit h whic h th e communit yhas ha d discussion s i s intereste d beginnin g wit h seasona l traffi can d allowin g i t t o buil d t o year-round . 

### Histori cTraffi cByYea r Traffi cpattern s have bee n dependen t largel yo n th e availabilit yo fcarriers t o provid e seasona l acces s t o th e MT

J market . Annua l Passenger s 

## Montros e Regiona l Airpor t

200 7 200 8 200 9 201 0 Th e Airpor t an d th e communit yhave grea t concern s regardin g th e futur e capacitytha t airline s wil l b e abl e t o offe rmarket s suc h as MTJ . A s th e Departmen t i s aware , majo rairlin e system s ar e no t addin g net-ne waircraf t t o thei rfleets , an d smalle rjet s - particularl y50-sea t version s - ar e bein g reduced. 6 Th e pla n tha t thi s gran t wil l facilitat e wil l brin g a lo wfar e carrie rt o th e Montros e Regiona l airport , wit h nonsto p je t servic e t o a t leas t on e majo rpopulatio n regio n i n th e West . Thi s i s no t jus t a plan , bu t i s a pla n tha t has bee n wel l i n motion , an d whic h ca n b e implemente d wit h th e fundin g fro m th e Smal l CommunityAi rServic e Developmen t Program . I n short , th e progra m wil l accomplis h exactl ywha t Congres s intende d wit h th e SCAS D program . I t wil l fil l a majo rai rservic e deficiency , an d wil l addres s wha t ar e veryhig h fare s i n th e region .

6As on e exampl e o fthis , jus t i n th e wee k o fJun e 4 , th e Delt a Ai rLine s syste m retire d seve n mor e CRJ-200 s fro m thei r regiona l fleets . I n addition , as o fschedule s file d Jun e 6 , U S airline s wil l b e offerin g 2.3 % les s capacityi n 201 2 compare d t o 2011 . Source : Aviatio n DataMine ranalysi s o fInnovata , LL C data . Docke t DOT-OST-2012-006 9 Pag e 8Proposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

### Ai rFare s - Hig h Montros e fare s ar e materiall yhighe rtha n othe rmarket s i n Colorado . Th e chart compare s fare s no t onl ya t Denve ran d Colorad o Springs , bu t a t Gran d Junction , whic h i s a regiona l airpor t i n wester n Colorad o as well . MT J G3

T CO S DE N Marke t Av g Far e Av g Far e Av g Far e Av g Far e SF O $302.8 0 $219.9 2 $261.4 5 $178.3 3 LA X $343.0 1 $119.1 4 $280.2 6 $147.6 4 SE A $333.1 2 $272.7 4 $243.7 0 $168.0 2 SA N $303.6 0 $216.2 1 $198.0 2 $138.4 9 PD X $319.1 6 $257.1 3 $222.7 4 $162.4 8 HN L $472.8 4 $398.5 8 $449.0 4 $423.4 8 SJ C $335.7 9 $237.3 6 $243.3 6 $198.1 0 PH X $356.1 0 $163.4 7 $195.0 8 $127.3 1 SM F $328.1 2 $254.9 8 $207.7 8 $160.4 0 LA S $347.6 7 $94.4 9 $124.8 9 $127.5 5 TU B $276.2 0 $200.5 8 $209.8 9 $135.5 7 BU R $336.4 5 $264.3 2 $263.2 3 $207.4 1 SB A $274.8 5 $247.1 4 $294.4 9 $175.3 5 FAT $313.0 7 $315.7 7 $313.9 3 $268.3 2 SL C $399.4 6 $273.5 0 $184.1 1 $120.3 6

Av g T o Wes t Al l Market s Pe t Far e Advantag e t o Wes t Pe t Far e Advantag e Al l Market s MT

J GO

TCO S $336.1 5 $235.6 9 $246.1 3 $182.5 9 $279.4 5 $252.0 1 $240.5 2 $185.5 9

-29.9 % -26.8 % -45.7 %
-9.8 % -13.9 % -33.6 % Overall , fare s ar e nearl y10 % abov e thos e a t Gran d Junction , an d muc h mor e s o a t Colorad o Spring s an d Denver . T o point s i n th e West , however , th e far e premiu m fo rusin g MT J i s enormousl yhighe rtha n th e othe rColorad o airports . Th e lo wfar e airlin e servic e tha t thi s gran t wil l make possibl e wil l have a materia l effec t o n alleviatin g thi s situation. 7

7Sourc e U S DO

Tdat a analyze d b yAviatio n DataMinerTM . Th e fare s show n ar e averag e on e way , includin g federa l fee s an d taxes . Docke t DOT-OST-2012-006 9 Pag e 9Proposa l o fMontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

# Pla n fo rGran t Implementatio n Th e Communit yan d th e Airport have complete d a progra m t o brin g lowe rfare s t o th e MT J region . 

### Targe t Carrier s Th e Airport an d th e Communit yhave bee n i n discussion s wit h a numbe ro fcarriers regardin g thi s objective . Confidentialit yi s a critica l competitiv e componen t i n thes e situations . However , thi s gran t wil l b e a majo rimpetu s t o attractin g a carrie rt o a t leas t on e majo rWester n populatio n center . 

### Th e Progra m - AMi xO fRis k Abatemen t & Marketin g Becaus e discussion s wit h keytarge t carriers ar e wel l along , th e structur e o fth e gran t i s requeste d t o b e flexible . A t thi s point , th e inten t i s t o offe rbot h risk-abatemen t fundin g t o incubat e th e newlo wfar e route , alon g wit h marketin g support . However , i n negotiation s wit h a t leas t on e carrier , i t wa s note d tha t th e fundin g wa s preferre d t o b e almos t entirel yfocuse d o n marketing , advertising , an d promotion . Th e strateg yexpresse d wa s tha t th e carrie rsee s stron g long-ter m potential , an d therefor e woul d prefe rt o focu s o n widenin g th e consume rknowledg e an d perceptio n o fth e trave l an d leisure opportunitie s o n th e Wester n Slop e o fColorado . Marketin g an d Advertisin g Progra m Th e targe t carrier s fo rthi s gran t have verycomprehensiv e in-hous e advertisin g an d marketin g strategies . At minimum , component s ofth e progra m wil l include :

•Loca l prin t medi a advertisin g illuminatin g th e ne wservice . •Electroni can d socia l medi a initiatives .
•Direct mai l as appropriat e t o keytrave l generator s i n th e region , as wel l as a t th e Wes t Coast destination(s) . •Aserie s o fpresentation s a t keycivi corganizations . •Join t airport/airlin e presentation s a t loca l busines s trave l generators . Th e carrier s wit h who m th e Communityi s havin g discussion s ar e read yt o ente rint o veryspecifi c negotiation s immediatel yupo n gran t award . However , i t i s emphasize d tha t thi s gran t i s absolutel ynecessar

yfo rth e servic e t o b e implemented .

Docke t DGT-OST-2012-006 9 Pag e 1 0Proposa l o fIviontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

### Potentia l Fundin g Distributio n Based o n informatio n fro m th e intereste d carriers , th e followin g tw o approache s are propose d Risk-Abatemen t

Fundin g Sourc e Ne wServic e Ris k

Guarante e Marketin g

& Outreac h Tota l TMRA O $83,33 3 $16,66 7 $100,00 0 DOTGran t $416,66 7 $83,33 3 $500,00 0 Tota l $500,00 0 $100,00 0 $600,00 0 Th e mai n focu s o fthi s approac h woul d b e t o offse t th e carrier' s ris k i n enterin g th e market . I t wil l b e base d o n a tightly-constructe d agreemen t clearl youtlinin g th e necessar yrevenue s pe r fligh t an d th e determinatio n o frevenu e computation s t o b e applied . Th e approac h i s no t new , an d i t wil l mirro rothe rsimila ran d successfu l program s supporte d by SCAS D grants . Th e airlin e wil l b e require d t o operat e a n agreed-upo n patter n o fflights , an d agre e t o provid e airline-controllabl e schedul e reliabilit ya t n o les s tha n 97% . Marketin g Suppor t Onl y Ther e ar e carrier s tha t woul d prefe rt o pu t al l fundin g int o verystron g an d focuse d marketin g effort s t o wide n th e profil e o fWester n Colorad o an d Montros e i n th e Wester n US . Therefore , th e followin g approac h i s requested : Fundin g Sourc e Marketin g &

Outreac h TMRA O $100,00 0 DOTGran t $500,00 0 Tota l $600,00 0 Th e progra m woul d b e directe d an d structure d jointl ybetwee n th e airlin e an d th e TMRAO , th e communit ypartne ri n thi s application . Th e progra m woul d b e pai d byTMRAO , wit h reimbursemen t o fth e DOTportio n remitte d t o TMRA O .

Docke t DOT-OST-2012-006 9 Pag e 1 1Proposa l o fMontros e Regiona l Airport , Colorad o 201 2 Smal l Communit yAi rServic e Developmen t Gran t 

### Ensurin g Ne wRout e Sel f- Sufficienc y MT J understand s tha t ther e ca n b e factor s tha t wil l adversel yaffec t ridershi p o n a ne wroute . Therefore , i t wil l b e i n clos e liaiso n wit h th e airlin e t o quickl yidentif yan yreductio n i n traffi c and/o rrevenu e growt h o n th e ne wservice . 1 ) MT J an d TMRA

O have a n extensiv e backgroun d i n recruitin g seasona l servic e an d takin g quic k actio n whe n indicate d t o assure success . 2 ) Thi s progra m is , a t it s foundation , a partnershi p wit h th e airline . Th e Airport an d Community wil l wor k t o identif yan yarea s o rdynamic s whic h ca n enhanc e ridership , an d wil l b e i n on goin g contac t wit h th e carrier . 3 ) I n thi s regard , MT

J an d TMRA

O have acces s t o local , regiona l an d airlin e industrydat a an d busines s intelligence . Thi s include s sophisticate d program s tha t trac k passengers bymarket , zi p cod e an d trave l segment . Thes e wil l b e use d t o support th e carrie ran d provid e inpu t regardin g matter s suc h as schedulin g shifts . Importantly , thi s ne wservic e wil l b e operate d wit h airliner s capabl e o f movin g trave l group s an d thei rsport s equipment . TMRA O wil l assure tha t thi s portio n o fth e travelling publi ci s attracte d t o th e ne wservice .

Docke t DOT-OST-2012-006 9 Pag e 1 2