McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 APPLICATION UNDER
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET DOT

- OST

- 2013

- 0120

SUMMARY INFORMATION

All applicants must submit this Summary Information schedule, as the application coversheet, a completed standard form SF424 and the full application proposal on www.grants.gov

. For your preparation convenience, this Summary Information schedule is located at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/SCASDP

A. P ROVIDE THE LEGAL SPO NSOR AND ITS DUN AND BRADSTREET (D& B) DATA UNIVERSAL NUMBE RING SYSTEM (DUNS)

NUMBER , INCLUDING +4, EMPLOYEE IDENTIFICAT ION NUMBER (EIN) OR TAX ID

. Legal Sponsor Name: City of McAllen , Texas ( McAllen

- Miller International Airport ) DUNS Number: 002741119 EIN/Tax ID: 74

- 6001650

B. L IST THE N AME OF THE COMMUNITY OR CONSORTIUM OF COM MUNITIES APPLYING : 1. C ITY OF M C A LLEN , T EXAS 2.
3.
4. C. P ROVIDE THE FULL AIRP ORT NAME AND 3

- L ETTER IATA A IRPORT C ODE FOR THE APPLICANT ( S ) AIRPORT ( S ) (O NLY

PROVIDE CODES FOR TH E AIRPORT ( S ) THAT ARE ACTUALLY SE EKING SERVICE ).
1. M C A LLEN - M ILLER I NTERNATIONAL A IRPORT (MFE) 2.
3. 4.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 2 D. L IST THE 2

- DIGIT CONGRESSIONAL DISTRICT CODE APPLIC ABLE TO THE SPONSORI NG ORGANIZATION , AND IF A CONSORTIUM , TO EACH PARTICIPATIN G COMMUNITY

.
1. TX

- 15 2. TX

- 28
3. 4.

E. A PPLICANT I NFORMATION : (C HECK A LL T HAT A PPLY )
Not a Consortium Interstate Consortium Intrastate Consortium
Community now receives subsidized Essential Air Service
Community (or Consortium member) previously received a Small Community Air Service Development Program Grant
If previous recipient: Year of grant(s):

F. P UBLIC

/P RIVATE P ARTNERSHIPS : (L IST O RGANIZATION NAMES ) PUBLIC PRIVATE
1. City of McAllen 1. McAllen Economic Development Corporation
2. 2. McAllen Chamber of Commerce
3. 3.
4. 4.
5. 5.

G. P ROJECT P ROPOSAL : ( CHECK ALL THAT APPLY ) Marketing Upgrade Aircraft New Route
Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Revenue Guarantee Launch New Carrier Start

- up Cost Offset First Service Study Secure Additional Service Other (explain below)

H. E XISTING L ANDING A IDS AT L OCAL A IRPORT : Full ILS Outer/Middle Marker Published Instrument Approach
Localizer Other (specify)McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 3 I. P ROJECT C OST : D O NOT ENTER TEXT IN SHADED AREA
L INE D ESCRIPTION S UB T OTAL T OTAL A MOUNT
1 Federal amount requested $750,000
2 State cash financial contribution
Local cash financial contribution
3a Airport cash funds $ 100,000
3b Non

- airport cash funds $ 100,000
3 Total local cash funds ( 3a + 3b ) $ 200,000
4 TOTAL CASH FUNDING ( 1+2+3 ) $ 950,000
In

- Kind contribution
5a Airport In

- Kind contribution** $ 327,477
5b Other In

- Kind contribution** $419,750
5 TOTAL IN

- KIND CONTRIBUTION ( 5a + 5b ) $ 747,227

6 TOTAL PROJECT COST ( 4+5 ) $1,697,227

J. IN

- KIND CONTRIBUTIONS**
For funds in lines 5a (Airport In

- Kind contribution) and 5b (Other In

- Kind contribution), please describe the source(s) of fund(s) and the value ($) of each.
McAllen

- Miller International Airport will waive landing fees , the RON fee, the jet bridge fee, the boarding lounge fee and exclusive use space fees for two years for the proposed Denver servic e . The total two year value of these in

- kind incentives is $327,477. Hotels in the community have offered to provide hotel rooms at no cost for up to five crew members f or two years. Based on a cost of $115 per room night, the two year value of this "other" in

- kind contribution is worth $419,750.

K. I S T HIS A PPLICATION S UBJECT T O R EVIEW B Y S TATE U NDER E XECUTIVE O RDER 12372 P ROCESS ?

a. This application was made available to the state under the Executive Order 12372 Process for review on (date) _____________.
b. Program is subject to E.O. 12372, but has not been selected by the state for review.

c. Program is not covered by E.O. 12372.

L. I S T HE A PPLICANT D ELINQUENT O N A NY F EDERAL D EBT ? (I F “Y ES ”, P ROVIDE E XPLANATION )

No Yes (explain)

_______________________________ _____________________________________________________________________

_______________________________________________________ ____________________________________________ _McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 4 

## TABLE OF CONTENTS

INTRODUCTORY LETTER

................................ ................................ ................................ .................... 5
AIRLINE LETTER OF SUPPORT

................................ ................................ ................................ ........... 6
EXECUTIVE SUMMARY

................................ ................................ ................................ ........................ 7 AIR SERVICE OVER VIEW

................................ ................................ ................................ ..................... 8 Catchment Area and Alternate Airports

................................ ................................ ................................ ................. 8 Existing Air Service

................................ ................................ ................................ ................................ ................ 9 Air Service Development Efforts

................................ ................................ ................................ .......................... 10 

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

................................ ............................. 11 Capacity Trends

................................ ................................ ................................ ................................ ................... 11
Traffic Trends

................................ ................................ ................................ ................................ ....................... 12
Domestic Fare Trends

................................ ................................ ................................ ................................ .......... 14
Domestic Far es Versus Domestic Fares at Other Airports in the Lower 48 United States

................................ . 15
McAllen Domestic Fares Relative to Other South Texas Air ports

................................ ................................ ....... 16 Leakage to Other Airports in South Texas

................................ ................................ ................................ ........... 17 

### STRATEGIC PLAN

................................ ................................ ................................ .............................. 18
Revenue Guarantee for Nonstop Service to Denver

................................ ................................ ........................... 18
Goals

................................ ................................ ................................ ................................ ................................ .... 20 Grant Amendments/Alternate Strategies

................................ ................................ ................................ ............. 20 

### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

................................ .......................... 20 Public / Private Partnerships

................................ ................................ ................................ ................................ 20 Project Funding

................................ ................................ ................................ ................................ .................... 21 Proposed Implementation Timeline

................................ ................................ ................................ ..................... 22 

### PROJECT MONITORING AND FINANCIAL CONTROL

................................ ................................ ...... 23
Success Metrics

................................ ................................ ................................ ................................ ................... 23 Legal Sponsor

................................ ................................ ................................ ................................ ...................... 24
Financial Controls

................................ ................................ ................................ ................................ ................ 24 

### LETTERS OF SUPPORT

................................ ................................ ................................ ..................... 25McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 5 

### INTRODUCTORY LETTERMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 6 

### AIRLINE LETTER OF SUPPORTMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 7 

### EXECUTIVE SUMMARY

McAllen

- Miller International Airport is proposing a Small Community Air Service Development Grant in the amount of $ 750,000 to supplement a community

- based cash contribution of $ 100,000 airport cash funding of $ 100
, 000
, airport in

- kind incentives valued at $327,477 and community

- funded in

- kind incentives valued at $419,750 to provide a minimum revenue guarantee for service from McAllen to Denver on either Frontier Airlines or United
Airlines

. Not only would Denver service provide a nonstop service for trave lers in the local market, but it would generate logical connections to at least 75 destinatio ns United serves from Denver and at least 27 airports
Frontier serves from Denver.

Currently, only two network carriers serve McAllen. American operates service t o its hub in Dallas/Ft. Worth, and United Airlines operates service to its hub in Houston. Allegiant also serves McAllen, but Allegiant's service is
limited to La s Vegas and Orlando/Sanford, and Allegiant does not provide connecting service beyond Las Ve gas or Orlando/Sanford. Aeromar, a Mexico City

- based airline operates less

- than

- daily service to Mexico City using
50

- seat regional jets.

In 2012, McAllen 's ex

- Allegiant capacity was do wn 3 7.2% since it peaked in 2007 , and total domestic and
international ex
- Allegiant traffic was do wn 20.8 % since it also peaked in 2007

. McAllen's average domestic ex
Allegiant fare stood at $244 in 2012, an increase of 30 .0 % from $188 in 2007 when capacity and traffic peaked

. Even when the Allegi ant data is included, McAllen's capacity is down 19 .9%, domestic traffic is down 21 .8% and the average domestic fare is up 19.2% to $216 from $181.

McAllen retains just 58.7% of the traffic generated in its catchment area (the catchment area is defined a s the
McAllen

- Mission Metropolitan Statistical Area); 36.4% of the traffic generated in McAllen's catchment area is lost to the airport in Harlingen, and 5.8% of the traffic is lost to the airport in Brownsville.

Travelers in the McAllen and the rest of th e Rio Grande Valley would benefit from the proposed service because McAllen's network carrier service is currently limited to just Dallas/Ft. Worth and Houston, and the proposed Denver service would it would provide service to a third hub. If Frontier we re to operate the service, travelers
would also benefit because Frontier is a low

- cost carrier, and Frontier would likely offer fares to Denver and the cities Frontier connects beyond Denver below the fares currently offered by American and United from McA llen to
these cities.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 8 

### AIR SERVICE OVERVIEW

Catchment Area and Alternate Airports

Th e McAllen

- Edinburg

- Mission Metropolitan Statistical Area is considered as the primary catchment area for
McAllen

- Miller International Airport , where most of the airport's traffic either originates or is destined, but the airport als o draws some traffic from other areas of Texas and Northeastern Mexico . The July 1, 2012
, Census Bureau population estimate of th e McAllen

- Edinburg

- Mission M etropoli tan Statistical A re a was 806,552 residents; the population of the metrop olitan statistical area grew 41.7 % since 2000 from 569,100 residents. The population
within a 60 minute drive of McAllen

- Miller International Airport is estimated to be 995,000, on the U.S. side of the border, and nearly 1.3 million within a two hour drive of the airport.

Other commercial service airports in the region are located in Harlingen and Brownsville.

Exhibit 1: One and Two Hour Drive T imes from McAllen

- Miller International Airport and the Location of the Airports in Harlingen and BrownsvilleMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 9 

### Existi ng Air Service

McAllen is served by American to its hub in Dallas/Ft. Worth, United to its hub in Houston, Allegiant to Las Vegas and Sanford and by Aeromar to Mexico City. These r outes, and the carriers operating the route s, are illustrated in
Exhibit 2.

Exhibit 2: Routes Operated by Carrier from McAllen

- Miller International Airport

The number of flights per day, average seats per flight and seats per day by market and by carrier scheduled in August 2013 versus August 2012 are displayed in Exhibit 3

. The data illustrates American h as scheduled an average of 677 seats per day each way in the Dallas/Ft. Worth market, and American's capacit y will increase 28.2% versus August 2012. United has scheduled a total of 370 seats per day each way on the average day in August 2013 to Houston, but United 's tot al capacity will be decline 3.6 % versus the 384 seats per day each way it
scheduled August 2 012. Overall, airline capacity at McAllen will increase from 1,110 sea ts per day in August 2012 to 1,272 seats p er day each way in August 2013, but only because American is adding capacity and because Aeromar began service to McAllen since August 2012; U nited and Allegiant have each scheduled less capacity versus last year.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 10 Exhibit 3 : Flights per Day *
, Seats per Flight and Seats pe r Day Each Way by Market and Carrier at McAllen

– August 2013 Versus August 2012 (OAG Data as of July 10, 2013 )

* T he number of flights per day is displayed in increments of sevenths (because there are seven days in a week) . "4 6 /7" is read as four flight s seven days a week with a sixth flight operated six of the seven days in a week. 

### Air Service Development Efforts

McAllen

- Miller International Airport actively seeks additional air service and meets with airlines on a regular basis
to discuss the McAllen market. Since June 2012, McAllen has met with 10 airlines in 16 meetings. A meeting in September 2012
, with Aero mar in Mexico City
, resulted in Aeromar beginning service from McAllen to Mexic o City
in March 2013. Exhibit 4 contains a list of McAllen's airline meetings since June 2012.

Exhibit 4 : Dates, Forum and Location of McAllen

- Miller International Airport Mee t ings with Airlines since June 2012McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 11 

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

Capacit y Trend s

McAllen 's total ex
- Allegiant capacity is down 37.2 % since it peaked in 2007 at 1,370 seats per day each way to
998 seats per day each way in 2012

. In fact, McAllen's ex

- Allegiant capacity was at a ten year low in 2012. The primary reason McAllen's capacity is down so drastically is because the capacity of United/Continental (Continental served McAllen prior to the United/Continental merger; United did not) is down 287 seats per day each way or 39.1% since 2007, and United's capacity was at a ten year low in 2012. Delta's capacity was down 77 seats per day each way in 2012, and Delta exited the McAllen market entirely in May 2012 when it
discontin ued two nonstops per day to Atlanta operated with 66

- seat regional jets. American's capacity has been relatively flat since 2005, and American's capacity exceeded the capacity operated by United for the first time in
2012. The trend in the number of seat s per day each way by carrier for the last ten y ears is illustrated in Exhibit
5

.
Exhibit 5 : Seats per Day Ea ch Way by Carrier at McAllen

- Miller International Airport Year

- End Fourth Quarter 2003

- 2012 (DOT T

- 100 D ata / Excludes Allegiant Data )

T his Section Continued on Next PageMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 12 

### Traffic Trend

s

McAllen's total traffic, to include Allegiant, is down 21.8% since it peaked in 2007 to 673,270 origin and destination (O&D) passengers in 2012. When Allegiant is excluded, McAllen's domestic plus international traffic
is down 30.6% to 510,830 O&D passengers in 2012 and domestic traffic alone is down 32.8%. Domestic, international and total O&D passengers in each of the last ten ye ars are illustrated in Exhibit 6

.

Exhibit 6 : Annual D omestic and International Origin and Destination (O&D) Passengers at McAllen

- Miller International Airport Year

- End Fourth Quarter 2003

- 2012 ( DB1B data)

T his Section Continued on Next PageMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 13 When McAllen 's annual O&D data is translated to passengers pe r day each way (PDEW), ex
- Allegiant domestic
traffic is down 300 PDEW from 919 PDEW in 2007 to 619 PDEW in 2012 ; international traffic is down ten PDEW
from 89 PDEW in 2007 to 79 PDEW in 2012. Allegiant's traffic grew to 173 PDEW in 2012, but total traffic is
down 231 PDEW from 1,102 PDEW in 2007 to 871 PDEW in 2012. It should also be noted that Allegiant traffic accounted for 19.8% of McAllen's traffic in 2012, but all Allegiant traffic was to just two destinations

– Las Vegas and Orlando/Sanford

– and Allegi ant does not connect traffic beyond these destinations. The PDEW data is
illustrated in Exhibit 7

.

Exhibit 7 : Annual Domestic and International Passengers per Day Each Way (PDEW) at McAllen

- Miller International Airport Year

- End Fourth Quarter 2003

- 2012 ( DB1B data)McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 14 

### D omestic Fare Trend

s

McAllen's average domestic ex

- Allegiant fare is up $69 each way or 39.7% over the last ten years to $244 each way. Since 2007 when both ex

- Allegiant capacity and traffic peaked, the average domestic fare is up $56 each
way or 30.0%. Declining capacity i s forcing fares higher and suppressing demand. The relationship of ex

Allegiant capacity, domestic traffic and the average domestic fare over the last ten y ears is illustrated in Exhibit 8

.

Exhibit 8 : Ex

- Allegiant Passengers per Day Each Way (PDEW), Seats per Day Each Way and Average Domestic One

- Way Fare at McAllen

- Miller International Airport

– Year

- End Fourth Quarter 2003

- 2012 (DOT T

- 100 and DB1B D ata)

T his Section Continued on Next PageMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 15 

### Domestic Fares Versus Domestic Fares at Other Airports in the Lower 48 United States

McAllen's average domestic ex

- Allegiant fare of $244 each way was $67 or 37.8% higher than the average
domestic fare of $177 at the average Lower 48 airport

. Not only is McAllen's average domestic ex

- Allegiant fare higher, but the McAllen fare is up more on both an absolute basis and on a percentage basis. Over the last ten years, McAllen's average ex

- Allegiant domestic fare is up 39.7% while the average fare at the average Lower 48 airport is up 28.5%. The average domesti c fare for McAllen and the average Lower 48 airport and the cumulative percent change in the average fare is illustrated in Exhibit 9

.

Exhibit 9 : Average One

- Way Ex

- Allegiant Domestic Fare at McAllen

- Miller International Airport and Cumulative Change sinc e 2003 Versus the Average Lower 48 Airport

T his Section Continued on Next PageMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 16 

### McAllen Domestic Fares Relative to Other South Texas Airports

Not only did McAllen have a high domestic ex

- Allegiant fare relative to the average Lower 48 airport in 2012
, McAllen's average domestic ex

- Alle giant fare was also higher than the average domestic fare of $162 at Harlingen and only slightly lower than Brownsville's average domestic fare.
Although Brownville's average domestic fare, at $250, was $6 higher than Mc Allen's fare of $244, Brownsville has much less capacity than McAllen. Airlines operated 309 seats per day each way at Brownsville versus the 998 seats per day operated at McAllen and 1,266 operated at Harlingen. The average domestic ex

- Allegiant fares for McAllen, Harlingen and Brownsville are illustrated in Exhibit 10 (among the three airports, Allegiant serves only
McAllen.

Exhibit 10 : 2012 Average Domestic Ex

- Allegiant Fares at McAllen, Harlingen and Brownsville. (DB1B Dat a )McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 17 

### Leakage to Other Airports in South Texas

The last leakage study completed in September 2009 using year

- end first quarter 2009 traffic data, revealed McAllen International Airport captured only 57.8% of the traffic generated in the McAllen

- Edinburg

- Mission metrop olitan statistical area

. The airport in Harlingen, which is served only by Southwest and United, captured 36.4% of the traffic, and the airport in Brownsville captured 5.8% of the traffic. The map in Exhibit 11 illustrates
the location of the alternate a irports and the amount of traffic captured at each airport.

Exhibit 11 : Percent of McAllen Catchment Area Traffic Captured at the Airports in McAllen
, Harlingen and Brownsville (September 2009 Leakage Study Data for Year

- End First Quarter 2009 Traffic)McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 18 

### STRATEGIC PLAN

Revenue Guarantee for Nonstop Service to Denver

McAllen's network carrier service is limited to American's service to its Dallas/Ft. Worth hub, and United's service to its Houston hub. Although Allegiant also serves McAllen, Allegiant does not offer connections beyond Las Vegas and Orlando/Sanford. Aeromar's service to Mexico City offers only limited connecting opportunties to a
few cities in Mexico.

McAllen

- Miller International Airport is proposing SCASDG funding for service to Denver on Frontier or United. Not only would a nonstop route from McAllen to Denver provide service in the local market, but service on United
could connect McAllen with at least 75 airports United serves from Denver and service on Frontier would connect
McAllen with at least 27 airports Frontier serves from Denver. The logical connecting markets United could
connect via Denver are il lustrated on the map in Exhibit 12, and the logi cal connecting markets Fontier could
connect via Denver are il lustrated on the map in Exhibit 13.

Exhibit 12 : Logical Connecting Markets United Could Serve with McAllen

- Denver Service (circuity not greater than 66%)McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 19 Exhibit 13 : Logical Connecting Ma rkets Frontier Could Serve with McAllen

- Denver Service (circuity not greater than 66%)

Denver ran ks as McAllen's ninth largest market with 17.4 passengers per day each way (PDEW) in 2012. The

aver age McAllen

- Denver fare was $181 each way in 2012. All markets United could logically flow via Denver generated 298 PDEW at an average fare of $ 210 in 2012; all markets Frontier could logically flow via Denver generated 269 PDEW at an average fare of $ 186 in 2012. Excluding Allegiant Las Vegas data , the markets United could logically flow via Denver generated 153 PDEW at an average fare of $ 297 in 2012, and the markets Frontier could logically flow via Denver generated 124 PDEW at an average fare of $ 267 in 2012. The data for all
markets that could logically flow via Denver on United and Frontier, both with and without Allegiant's Las Vegas traffic, and including the local Denver traffic of 17.4 PDEW is illustrated in the table in Exhibit 14

.

Exhibit 14 : 2012 Passengers per Day Each Way (PDEW) an d Average One

- Way Fare in the Markets United and Frontier Could Flow via Denver (DOT DB1A Data / Market Sizes for Airports in Metropolitan Areas with Multiple Airports Are Grouped Together, i.e., SFO/SJC/OAK)McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 20 

### Goals

McAllen

- Miller International Airport has three goals for the proposed project to recruit service from McAllen to
Denver on United or Frontier :

 Reverse the d ownward trends in airline capacity and airline traffic at McAllen

- Miller International Airport

.

― Additional capacity will likely put downward pressure on the average fare paid by travelers

.

 Recapture t raffic generated in McAllen 's catchment area, but leaked to the airports in Harlingen and
Brownsville

.

 Reduce the number of connections to markets not served with a single connection o n America n's existing service to its Dallas/Ft. Worth hub and United 's existing service to its hub in H ouston.



### Grant Amendments/

Alternate Strategies

McAllen

- Miller International Airport 's primary air service development goal is for new service from McAlle n to
Denver on United or United Express

. If the Department awards McAllen

- Miller International Airport a grant for the proposed service, but the community is not successful in recruiting service to Denver on either carrier, the a irport
and the community may request the Department consider redirect ing award funding to assist in recruiting other
service

.

In additi on to the proposed Denver service, the a irport and the community have also identified Chicago, Phoenix
and Atlanta as h ub s that could provide t ravelers in the area with service not only in the local Chicago, Phoenix or
Atlanta market s , but also connections to many destinations served beyond these hubs. If the airport is not successful in attracting service to Denver, the airport would meet with the appropriate airlines to discuss service to Chicago (United and American), Phoenix (US Airways/American) and Atlanta (Delta).


### PROJECT IMPLEMENTATION, MONITORING AND FUNDING Public / Private Partnerships

The airport, l ocal governments and business organizations in the region understand the importance of affordable air fares, and the relationship between air fare affordability and economic growth. Based on this recognition and awareness, the airport manager regularly conducts community outreach meet ings with business and government organizations to discuss the importance of air service to the economy of McAllen and using the local airport when traveling both for business and leisure. The McAllen Economic Development Corporation and the McAllen Chamb er of Commerce have partnered with the City of McAllen and McAllen Miller International Airport for this project and have pledged cash funding of $100,000 to support the proposed minimum revenue guarantee.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 21 

### Project Funding

In addition to the Small Community Air Servi ce Deve lopment Grant of $750,000 requested from the Department, organizations in the community are willing to provide cash of $ 100,000 to be applied toward a minimum revenue guarantee . The a irport will provide cash of $100,000 for marke ting and estimates the value of its in

- kind
contributions from waive d fees at $327,477 (for two years) , based on one rou ndtrip operated with a 138

- seat Airbus A319 . The total value of cash and in

- kind contributions from the community and the airport is v alued at $ 947,227 or 55.8 % of the total project cost of $1, 697,227

. A summary of fundin g sources is shown in Exhibit 15

.

Exhibit 15 : Summary of Sources and Types of Project FundingMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 22 

### Proposed Implementation Timeline

The proposed implementation timeline for the project assumes the Department will award Small Communit y Gra nt Funding in September 2013 . Once the award is announced
, McAllen

- Miller International Airport wi ll advise both
United and Frontier of the grant award

. Based on the airline planning lead times and the need for ad vanc e bookings, we assume it could not begin service until the la t ter half of 2014 at the earliest , and a preliminary discussion with one airline indicated service could not begin until Winter 2 014, but the airline would need to know if SCASD funding were available from the 2013 SCASD Program to make a decision. The first two milestones on the Airport's timel ine are to execute the grant agree ment with the Department and to negotiate the minimum

revenue guarantee agreement with the airline . Once service is announced and schedules are published, the
airline
, the Airport and the community would begin marketing the n ew route and working with the airline to monitor advance bookings. The Airport will continue its marketing pro gram and continue to work with the airline to
monitor the route once service begins. The Airport will submit grant status reports on a quarterly basis to the Depart ment throughout the proposed three

- year term of the minimum reve nue guarantee. The proposed project
timeline is shown in Exhibit 16

.

Exhibit 16 : Proposed Project TimelineMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 23 

### PROJECT MONITORING AND FINANCIAL CONTROL
Success Metrics

The ultimate s u ccess of th e progra m will be based on either United or Frontier operating service to Denver , or if
neither airline begin s Denver service, an airline operating service to one of the alternate hubs mentioned

– Chicago, Phoenix or Atlanta. Regardless of whether the community obtains service to Denver or one of the specif ied alternate hubs , the community expects the new service to put downward pressure on fares in the

ma rkets served by the airline, increase traffi c at the airport and reduce the amount of lea kage to the airports in Harlingen and Brownsville

. The Airport wi ll work with the airline to continuously moni tor the performance of the
new service . Even before service begins , we will communicate with the airline on a regular basis to monitor advance bookings and week

- over
- week a dvance bookings. Marketing and promot ional activities can be adjusted if advance bookings are weak or are not booking at a rate satisfactory to the airline. A summary of the project goals and success met rics is shown in Exhibit 17

.

Exhibit 17 : Project Goals and Success Metrics

Project Goals Success Metric

 Reverse the d ownward trends in airline capacity and airline traffic at McAllen

- Miller International Airport

.  Quarterly year

- over
- year increases in airline capacity and traffic

.

 Downward pressure on the average fare paid by travelers

.  Quarterly year

- over
- year declines in the average fares paid in McAllen

.
 Recapture t raffic generated in McAllen 's catchment area, but leaked to the airports in Harlingen and Brownsville

.  Increased quarterly year

- over
- year origin and destination traffic

.

 Reduce the number of connections to markets not served with a single connection on American's exi sting service to its hub in Dallas/Ft. Worth and United 's existing service to its hub in Houston.  Increases in traffic in markets not previously served with a single connection via Dallas/Ft. Worth or Houston.

Once service begins, the Airport will rely on traffic and revenue data provided directly by the airline and the
amount of minimum revenue guarantee reimbursements requested by the airline as indications of project

success. T

- 100 data and DB1B data will also be analyzed to compare year

- over
- year market size growth on a quarterly basis. In addition, the airport will analyze leakage once the service has operated for a full year to
determine the trend in le akage to other airports. The Airport will report its success metrics in the quarterly grant reports to the Department.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 24 

### Legal Sponsor

McAllen

- Miller International Airport is owned and operated by the City of McAllen
, Texas , and the City of McAllen
is the legal sponsor responsible for administering the program; t he City of McAllen is a government entity.

Philip K. Brown Director of Aviation City of McAllen, Texas McAllen

- Miller International Airport 2500 South Bicentennial Blvd., Suite 100 McAllen, TX 78503

- 3140 956

- 681

- 1500 (office) 956

- 681

- 1510 (fax)



### Financial Controls

As the sponsor, McAllen

- Miller International Airport and its governing body, The City of McAllen , will be the responsible partie s for all fiscal matters and the Department's reporti ng requirements. The City of McAllen is established as a public governing body. As a public entity
, the Department can be assured that proper financial controls are in place to guarantee that the Department ’s Grant will be used in accordance with any subse quent agreement. The City of McAllen understands that the Grant is a reimbur sable grant, meaning the City is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total grant request.McAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 25 

### LETTERS OF SUPPORTMcAllen

- Miller International Airport ; McAllen, Texas

Proposal Under the Small Community Air Service Development P rogram; Docket DOT

- OST

- 2013

- 0120 26