Docket DOT-OST-2012-0069 

Application under the Small Community Air Service 

Development Grant Program of 

Montrose Regional 

Airport 

Montrose, Colorado 

Under 49 U.S.C. 41743 etseg 

DUNS #076471077 

EIN #846000787 

Colorado Congressional District #3 

Legal Sponsor: Montrose Regional Airport 
= Montrose Regional Airport 

2100 Airport Road » Montrose, CO 81401 » (970) 249-3203 * FAX (970) 249-2808 

June 8, 2012 

Department of Transportation 

400 7t h Street SW 

Washington, DC 20590 

Attention: Aloha Ley 

Associate Director, Department of Transportation 

Subject: Application under the Small Community Air Service Development Program 

Montrose Regional Airport, Montrose County, Colorado 

Docket OST-2012-0069, DUNS 076471077, ETN 846000787 

Montrose Regional Airport recently underwent a terminal expansion and renovation to accommodate 

growing enplanements due to our region's air guarantee program. Revenue guarantees currently in place 

ensure air service to our region. Although they are not sufficient to offset high ticket prices or provide 

air service from the western United States. This grant would allow our region to expand air service to 

include access to the western United States. 

Montrose Regional Airport (MTJ) has two runways. Our primary runway is 17-35. This runway is 

10,000 feet long and 150 wide with an Instrument Landing System on runway 17. Our secondary 

runway is 13-31 with a length of 7500 feet and width of 100 feet. Both runways have high intensity 

runway lights which are pilot controlled. In addition, we have a VOR-DME and rotating beacon. 

Given this opportunity to improve our air service, we have submitted the following proposal that 

includes a grant request of $500,000 for your consideration. We believe it will be a productive use of 

funds, accomplishes the intent of the SCASD program, and will benefit not only our community but our 

entire region that includes the towns of Telluride, Ouray, Ridgeway, and Delta as well. We hope you 

find our Airport deserving of a grant. 

Lloyd^D. Arnold 

Director of Aviation 

Montrose Regional Airport 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Proposal Outline 

Montrose Regional Airport, in partnership with the Telluride Montrose Regional Air Organization, 

herein submits its proposal for funds under the 2012 Small Community Air Service Development 

Grant Program, Docket OST 2012-0069. 

Major Service Deficiency: Westbound Access 

Montrose Regional Airport (MTJ) is the main air service gateway for the central Western Slope 

area of Colorado. However, because of changes in the structure of the US airline industry, the 

region has no rear-round access service to the Western United States, and all access is very high 

fare. Except for approximately three months in the winter season, the only access to the west is 

via backtracking over Denver, and service is provided by only one airline, United, operating 50-

seat regional jets. 1 

While highly reliable, and very much appreciated by the Montrose community, the United service 

to their Denver hub has very high load factors, resulting in difficulty for consumers to get to the 

west, and experiencing high fares. 

Objective of The Grant 

This grant is intended not only to bring ultimately year-round nonstop service to the US West, 

but also bring a low-fare carrier to the Western Slope. 

The Airport and the Community have identified and have been in substantive contact with 

potential airlines who expressed interest in partnering with Montrose in establishing affordable 

nonstop air service to the west.2 However, a mix of revenue offsets are needed, and/or 

(depending on the specific carrier) significant marketing support to assure that service is 

successful. 

The Grant 

In this application, the Airport and the Community are requesting a grant of $500,000, to be 

matched with $100,000 in local dollars, to provide a revenue guarantee and marketing funding to 

support the new service. The grant is intended for a two year period. 

Sponsorship 

The Montrose Regional Airport is the official sponsor of this grant application. 

The Telluride Montrose Regional Air Organization will be responsible for the community 

participation in the grant administration. 

1

 In the 2011-2012 winter ski season, the Telluride Ski Area and the Telluride Montrose Regional Air Organization were 

able to recruit SkyWest into the LAX-MTJ market, but due to reductions in RJ fleets, this seasonal service may be 

problematic to recruit in the future. This grant is focused on sustainable, low fare access. 

2

 Please see the letter of support from Allegiant Airlines in the appendix of this application. 

Docket DOT-OST-2012-0069 Page 2 
Proposal of Montrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Contact Information 

All correspondence regarding this proposal should be referred to: 

Lloyd D. Arnold, CM. 

Director of Aviation 

Montrose Regional Airport 

Montrose, Colorado 

970-249-3433 

Docket DOT-OST-2012-0069 Page 3 
Proposal of Montrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Table of Contents 

PROPOSAL OUTLINE 2 

Major Service Deficiency: Westbound Access 2 

Objective of The Grant 2 

The Grant 2 

Sponsorship 2 

Contact Information 3 

1. THE MTJ MARKET 5 

Geographic Location & Market Population 5 

Tourism: Economic Engine. Hampered By Lack of Western Access 6 

Current Service Patterns 7 

Seasonality 7 

Historic Traffic By Year 8 

Air Fares - High 9 

PLAN FOR GRANT IMPLEMENTATION 10 

Target Carriers 10 

The Program - A Mix Of Risk Abatement & Marketing 10 

Marketing and Advertising Program 10 

Potential Funding Distribution 11 

Risk-Abatement 11 

Marketing Support Only 11 

Ensuring New Route Self - Sufficiency 12 

Docket DOT-OST-2012-0069 Page 4 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

l.The larket 

Geographic Location & Market Population 

Montrose Regional Airport is the main gateway to the Colorado Western Slope, and serves a 

resident population of over 50,000. In addition to agriculture, the region is a major recreational 

destination, and a large resort industry is dependent on Montrose Regional for access to and 

from the rest of the nation and the globe. 

Montrose Regional Airport 

Primary Catchment Area 

)fi9\0 - — 

Worth dale 

The local population base is located along the north/south US 50/550 corridor, bordered by 

Delta, Colorado in the north, and Ouray/Red Mountain Pass to the south. In addition to 

agriculture and recreational tourism, the region has been attracting interest of light 

manufacturing industries. The additional air service, which this grant request can deliver, will be 

Docket DOT-OST-2012-0069 Page 5 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

an enormous boost to the competitiveness of Colorado's Western Slope within the global 

economy.3 

Tourism: Economic Engine. Hampered By Lack of Western Access 

Tourism and recreational traffic is the lifeblood of the region. Analysis of the traffic flows at 

Montrose Regional clearly demonstrates this dynamic: 

Psg? c

'c Originating % of Pax 

1 IAH 14,670 16.06% 8.18% 

2 DFW 12,651 15.46% 7.05% 

3 DEN 11,224 32.3*4 6.26% 

4 EWR 10,209 13.25% 5.69% 

5 ORD 10,172 20.81% 5.67% 

6 LGA 8,534 23.15% 4.76% 

7 ATL 7,546 14.45% 4.21% 

8 AUS 5,096 15.95% 2.84% 

9 BOS 4,624 27.01% 2.58% 

Ifl TPA 3,286 33.45% 1.83% 

Top 

10 Totals 88,013 2004*1 49.06% 

The top ten O&D destinations at MTJ are shown, along with the total passenger demand for year 

2011. Note that only 24.9% of the passenger trips are locally-originated. The remainder are 

visitors coming to the Western Slope from other parts of the nation. This demonstrates the 

importance of having adequate air service access to the region.4 

The destinational distribution is also of note. The top ten destinations represent almost half of all 

traffic at MTJ, yet none include any major commercial and population centers in the US west. 

This is simply because there is no year-round service to these points, except via circuitous 

connections on 50-seat jets over Denver. Even here, the fares are very expensive as well. 

It is again noted that because the traffic base (and economic base) of Montrose depends on 

visitors, not having adequate access to the west is a major air service deficiency. Furthermore, 

because the nearest airport with any strong levels of service to the west is Denver - a six hour 

drive in good weather, and a likely 8-hour drive in the winter - this area of Colorado is essentially 

cut off from air service to the Western United States. 

The bottom line is that the service that this grant will make possible will open this region of 

Colorado (and its all-important recreational economy) to the populations of the West. 

3

 Recently the County was negotiating with aviation firm from the EU for a major manufacturing facility 

4

 Source: US DOT-reported data, analyzed by Aviation DataMinerTM from Boyd Group International. 

Docket DOT-OST-2012-0069 Page 6 
Proposal of Montrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Past Service Patterns 

Winter service patterns (first quarter) are significantly higher than second quarter patterns. This 

grant will incubate new service to the west that will balance out much of this seasonality. The 

MTJ-LAX is in place only on week-ends in the winter, with small 50-seat jets. 

Seasonality 

The nature of the MTJ market drives highly seasonal traffic demand. The first quarter of the year 

is the peak, with the third quarter representing a secondary peak.5 

viation 

• DataMiner 

60,000-, 73,135 

60 000-

§ 40.0004 

S 

20 000-

O&D Passenger Trend 

74,557 75,761 

$287.28 

1242.27 

2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 

$300.00 

$250.00 

$200.00 

$150.00 

$100.00 

I-$50.00 

$0.00 

2011Q4 

5

 Source: Aviation DataMinerTM - fares shown are average one-way, net of federal fees and taxes. 

Docket DOT-OST-2012-0069 Page 7 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

One of the objectives of this grant application is to establish - either initially or at some point 

after service is begun - year-round service patterns to the West. One of the target carriers with 

which the community has had discussions is interested beginning with seasonal traffic and 

allowing it to build to year-round. 

Historic Traffic By Year 

Traffic patterns have been dependent largely on the availability of carriers to provide seasonal 

access to the MTJ market. 

Annual Passengers 

Montrose Regional Airport 

2007 2008 2009 2010 

The Airport and the community have great concerns regarding the future capacity that airlines 

will be able to offer markets such as MTJ. As the Department is aware, major airline systems are 

not adding net-new aircraft to their fleets, and smaller jets - particularly 50-seat versions - are 

being reduced.6 

The plan that this grant will facilitate will bring a low fare carrier to the Montrose Regional 

airport, with nonstop jet service to at least one major population region in the West. This is not 

just a plan, but is a plan that has been well in motion, and which can be implemented with the 

funding from the Small Community Air Service Development Program. 

In short, the program will accomplish exactly what Congress intended with the SCASD program. 

It will fill a major air service deficiency, and will address what are very high fares in the region. 

6

 As one example of this, just in the week of June 4, the Delta Air Lines system retired seven more CRJ-200s from their 

regional fleets. In addition, as of schedules filed June 6, US airlines will be offering 2.3% less capacity in 2012 compared 

to 2011. Source: Aviation DataMiner analysis of Innovata, LLC data. 

Docket DOT-OST-2012-0069 Page 8 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Air Fares - High 

Montrose fares are materially higher than other markets in Colorado. The chart compares fares 

not only at Denver and Colorado Springs, but at Grand Junction, which is a regional airport in 

western Colorado as well. 

MTJ G3T COS DEN 

Market Avg Fare Avg Fare Avg Fare Avg Fare 

SFO $302.80 $219.92 $261.45 $178.33 

LAX $343.01 $119.14 $280.26 $147.64 

SEA $333.12 $272.74 $243.70 $168.02 

SAN $303.60 $216.21 $198.02 $138.49 

PDX $319.16 $257.13 $222.74 $162.48 

HNL $472.84 $398.58 $449.04 $423.48 

SJC $335.79 $237.36 $243.36 $198.10 

PHX $356.10 $163.47 $195.08 $127.31 

SMF $328.12 $254.98 $207.78 $160.40 

LAS $347.67 $94.49 $124.89 $127.55 

TUB $276.20 $200.58 $209.89 $135.57 

BUR $336.45 $264.32 $263.23 $207.41 

SBA $274.85 $247.14 $294.49 $175.35 

FAT $313.07 $315.77 $313.93 $268.32 

SLC $399.46 $273.50 $184.11 $120.36 

Avg To West 

All Markets 

Pet Fare 

Advantage to 

West 

Pet Fare 

Advantage All 

Markets 

MTJ GOT COS 

$336.15 $235.69 $246.13 $182.59 

$279.45 $252.01 $240.52 $185.59 

-29.9% -26.8% -45.7% 

-9.8% -13.9% -33.6% 

Overall, fares are nearly 10% above those at Grand Junction, and much more so at Colorado 

Springs and Denver. To points in the West, however, the fare premium for using MTJ is 

enormously higher than the other Colorado airports. 

The low fare airline service that this grant will make possible will have a material effect on 

alleviating this situation.7 

7

 Source US DOT data analyzed by Aviation DataMinerTM. The fares shown are average one way, including federal fees 

and taxes. 

Docket DOT-OST-2012-0069 Page 9 
Proposal of Montrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Plan for Grant Implementation 

The Community and the Airport have completed a program to bring lower fares to the MTJ 

region. 

Target Carriers 

The Airport and the Community have been in discussions with a number of carriers regarding this 

objective. Confidentiality is a critical competitive component in these situations. However, this 

grant will be a major impetus to attracting a carrier to at least one major Western population 

center. 

The Program - A Mix Of Risk Abatement & Marketing 

Because discussions with key target carriers are well along, the structure of the grant is 

requested to be flexible. At this point, the intent is to offer both risk-abatement funding to 

incubate the new low fare route, along with marketing support. 

However, in negotiations with at least one carrier, it was noted that the funding was preferred to 

be almost entirely focused on marketing, advertising, and promotion. The strategy expressed was 

that the carrier sees strong long-term potential, and therefore would prefer to focus on widening 

the consumer knowledge and perception of the travel and leisure opportunities on the Western 

Slope of Colorado. 

Marketing and Advertising Program 

The target carriers for this grant have very comprehensive in-house advertising and marketing 

strategies. At minimum, components ofthe program will include: 

• Local print media advertising illuminating the new service. 

• Electronic and social media initiatives. 

• Direct mail as appropriate to key travel generators in the region, as well as at the West 

Coast destination(s). 

• A series of presentations at key civic organizations. 

• Joint airport/airline presentations at local business travel generators. 

The carriers with whom the Community is having discussions are ready to enter into very specific 

negotiations immediately upon grant award. However, it is emphasized that this grant is 

absolutely necessary for the service to be implemented. 

Docket DGT-OST-2012-0069 Page 10 
Proposal of Iviontrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Potential Funding Distribution 

Based on information from the interested carriers, the following two approaches are proposed 

Risk-Abatement 

Funding 

Source 

New Service Risk 

Guarantee 

Marketing 

& Outreach 

Total 

TMRAO $83,333 $16,667 $100,000 

DOT Grant $416,667 $83,333 $500,000 

Total $500,000 $100,000 $600,000 

The main focus of this approach would be to offset the carrier's risk in entering the market. It 

will be based on a tightly-constructed agreement clearly outlining the necessary revenues per 

flight and the determination of revenue computations to be applied. 

The approach is not new, and it will mirror other similar and successful programs supported by 

SCASD grants. The airline will be required to operate an agreed-upon pattern of flights, and 

agree to provide airline-controllable schedule reliability at no less than 97%. 

Marketing Support Only 

There are carriers that would prefer to put all funding into very strong and focused marketing 

efforts to widen the profile of Western Colorado and Montrose in the Western US. Therefore, the 

following approach is requested: 

Funding 

Source 

Marketing & 

Outreach 

TMRAO $100,000 

DOT Grant $500,000 

Total $600,000 

The program would be directed and structured jointly between the airline and the TMRAO, the 

community partner in this application. The program would be paid by TMRAO, with 

reimbursement of the DOT portion remitted to TMRAO . 

Docket DOT-OST-2012-0069 Page 11 
Proposal of Montrose Regional Airport, Colorado 

2012 Small Community Air Service Development Grant 

Ensuring New Route Self - Sufficiency 

MTJ understands that there can be factors that will adversely affect ridership on a new route. 

Therefore, it will be in close liaison with the airline to quickly identify any reduction in traffic 

and/or revenue growth on the new service. 

1) MTJ and TMRAO have an extensive background in recruiting seasonal service and taking 

quick action when indicated to assure success. 

2) This program is, at its foundation, a partnership with the airline. The Airport and Community 

will work to identify any areas or dynamics which can enhance ridership, and will be in ongoing contact with the carrier. 

3) In this regard, MTJ and TMRAO have access to local, regional and airline industry data and 

business intelligence. This includes sophisticated programs that track passengers by market, 

zip code and travel segment. 

These will be used to support the carrier and provide input regarding matters such as 

scheduling shifts. Importantly, this new service will be operated with airliners capable of 

moving travel groups and their sports equipment. TMRAO will assure that this portion of the 

travelling public is attracted to the new service. 

Docket DOT-OST-2012-0069 Page 12