# Proposal under the Small Community
Air Service Development Program

Docket #: DOT

- OST

- 2011

- 0119

Legal sponsor: County of Kalamazoo

DUNS: 134404099 Congressional District Code: MI

- 06

Contact: Clifton E. Moshoginis, CM

- Airport Director Address: 5235 Portage Road, Kalamazoo, MI 49002

- 1766 Phone: (269) 388

- 3668 Email: cemosh@kalcounty.com 

# Kalamazoo

- Battle Creek International Airport Kalamazoo, MIProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport

Prepared by**Table of Contents** 

# Table of **C ontents** 

Page

Summary Information

................................ ................................ 1
Proposal Highlights

................................ ................................ .... 2 Higher than Average Airfares

................................ .......................... 2 Community Cost Contribution

................................ ......................... 2

Public

- Private Partnership

................................ ............................... 3
Material Benefits

................................ ................................ ............. 3 Use of Funds in a Timely Fashion

................................ ................... 3



### Air Service Environment

................................ ............................ 4

Market Reach and Potential

................................ ............................ 4 Large and Diverse Employers

................................ ......................... 5 Higher Education

................................ ................................ ............ 6

Tourism

................................ ................................ ........................... 7



### Air Service

– Existing and Historical

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

................................ ................................ ......... 8
Historical Air Service

................................ ................................ ....... 9 Extenuating Factors that have Affected Air Service

...................... 11 Past Air Service Development Efforts

................................ ........... 11



### Air Service Needs and Deficiencies

................................ ........ 12 Higher Than Average Fares

................................ .......................... 12 Underserved Market Driving High Diversion

................................ . 13

Unmet Business Travel Demand

................................ .................. 13


### Strategic Plan

– Air Service

................................ ..................... 15 Project Goals

................................ ................................ ................ 15 Proposed Air Service

................................ ................................ .... 15 Airline Participation

................................ ................................ ....... 15 Market Analysis

................................ ................................ ............. 16

Alternate Plan

................................ ................................ ............... 17 Previous Grant Recipient

- New Project and Goals

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


### Strategic Plan

– Implementation and Funding

....................... 19

Public

- Private Partnership

................................ ............................. 19 Incentive and Support Plan

................................ ........................... 20 Strategic Plan Funding

................................ ................................ .. 22 Project Continuation and Sustainability

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


### Schedule and Monitoring

................................ ......................... 23 Milestones for Timely Completion of Project

................................ . 23 Strategic Plan Monitoring Program

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


### Appendix A. Marketing, Public Relations and Communications Plan

................................ .................. 25
Appendix B. Community Support

................................ ........... 33
Appendix C. Detailed Market Analysis

................................ .... 50Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Summary Information** 

### 1



# Summary Information

A. Applicant Information: ( Check all that apply)

X Not a
Consortium Interstate
Consortium Intrastate
Consortium Community now receives EAS subsidy

X Community (or Consortium member) previously received a Small Community Grant If previous recipient, Date of grant: 2004

E xpiration date of grant: September 2006

B. Public/Private Partnerships: (List organization names)

Public Private

County of Kalamazoo Southwest Michigan

First Kalamazoo County
Convention & Visitors Bureau

C

. Project Proposal: (Check all that apply)

X Marketing Upgrade
aircraft X New route

Travel Bank Service

restoration Subsidy

Surface transportation Regional

service X Revenue guarantee

Launch new

carrier X Start

- up cost
offset First service

Study X Secure addtl

service Other (explain below)

D. Existing Landing Aids at Local Airport:

X Full ILS X Published Instrument Approach

X Localizer X Outer/Middle Marker

X Other (specify): PAPI, VOR E. Project Cost:

Line Description Sub

Total Total

Amount

1 Federal amount requested $ 500,000

2 State cash financial

contribution $ 0

Local cash financial

contribution 3a Airport cash funds $ 170,350

3b Non

- airport cash funds $1 10,000

3 Total local cash funds (3a+3b) $ 280,350

4 TOTAL CASH FUNDING (1+2+3) $ 780,350

In

- Kind contribution 5a Airport In

- Kind

contribution** $12,820

5b Other In

- Kind

contribution $30,000

5 TOTAL IN

- KIND CONTRIBUTION (5a+5b ) $ 42,820

6 TOTAL PROJECT COST (4 + 5 ) $ 823,170

F. 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) for each.

Airport In

- Kind: Fee Waivers

Other In

- Kind: Marketing match

G. Is this application subject to review by State under Executive Order 12372 process?

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.

H. Is the Applicant delinquent on any Federal debt? (if “yes”, provide explanation)

No Yes (explain ) X

XProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Proposal Highlights** 

### 2



# P **roposal Highlights**

his Small Community Air Service Development Program (SCASDP) grant
application for Kalamazoo/Battle Creek International Airport (AZO) meets

the criteria of Docket DOT

- OST

- 2011

- 0119

. The County of Kalamazoo

, the airport sponsor, is requesting $500,000 in federal assi stance to
implement a $ 823,170 air service initiative.

The project goal is to improve air service to high demand markets in the

Southe rn US, Mexico, Central and South America

. New service to a Southern

hub is the region’s top p riority. The Strategic Plan

, American Eagle service to

Dallas

- Fort Worth

, will achieve the project goal

.



### Higher than Average Airfares

The lack of competitive service at AZO has led to airfares significantly higher
than surrounding airports. Average airfares have generally bee n 50 percent
higher than most airports in the region, and in calendar year 2010 **AZO**

. AZO has an estimated true market of **exceeded the US average by 52 percent**

almost 825,000 origin and destination passengers annually; however, current air
service only meets the needs of 32 percent of those travelers. Sixty

- eight percent
of travelers are making the costly drive to alternate a irports to obtain sufficient air
service. Local Kalamazoo companies prefer to originate travel at AZO and
understand the need for reasonable premiums over hub airfares; however, the
premiums are so high that they continually have to compare this additional cost
to the lost time required to originate at an airport outside the catchment area.
New competitive s ervice to the Southern part of the US will reduce passenger

diversion and lower airfares to many of AZO’s top destinations

.



### Community Cost Contribution

It is estimated that a $ 500,000 revenue guarantee, $ 240 ,000 two

- year marketing

program , and fee waivers will be required for a one

- flight service pattern to

Dallas

. The research and analysis necessary to determine the viability of AZO

Dallas service has been completed (refer to one and two roundtrip route

forecasts in Appendix C ). The route forecast is positive

. Feedback from American
Eagle has been encouraging. However, an incentive package to mitigate the

start

- up year’s risks will be required. Acc ordingly, AZO and its partners have
created a Strategic Plan that addresses the economic risks that American will
face during start

- up. 

# T This section contains:
Highlights of the County of
Kalamazoo’s grant
application to demonstrate
how this application meets
the priorities of the
Program.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Proposal Highlights** 

### 3

To support this air service initiative, AZO and the community will fund 39 percent of the proposed $ 823,170 Strategic Plan. Non

- airport revenue sources will fund

14 percent ($ 110,000 ) of the $ 780,350 cash requirement.



### Public

- Private Partnership

The County of Kalamazoo / AZO has formed a public

- private partnership with two
private partners: Southwest Michigan First and Kala mazoo County Convention &

Visitors Bureau

. This partnership has worked together for many year s to improve

air service at AZO

.



### Material Benefits

AZO is vital to the economic future of Southwest Michigan

, and its importance

will continue to increase. AZO has a large close

- in population compared to other
airports of its size with a population over 1.7 million within 50 miles . Within AZO’s
catchment area are several major employers including a number of Fortune 500
companies such as Kellogg Company, Whirlpool Corporation, Stryke r Corporation, Parker Hannifin, Pfizer and Eaton Corporation. Southwest Michigan

is home to Western Michigan University, Kalamazoo College, Kalamazoo Valley
Community College, Kellogg Community College, Southwestern Michigan
College and other local educati onal institutions with over 45,000 college students

in the local area. A link between AZO and Dallas will meet the needs of these

sectors including business es , education al institutions and other enterprises.



### Use of Funds in a Timely Fashion

The public

- private partnership has a solid schedule and strategic plan to ensure
timely use of the funds. Meetings have been held with American in anticipation of
this grant application, and the route is under consideration. 

### Currently the route is under review by American Eagle, and they continue to express interest.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Environment** 

### 4



# Air Service Environment

ZO is a county

- owned non

- hub airport serving Southwest Michigan. AZO
is vital to the economic future of Southwest Michigan

, and its importance

will continue to increase. This sectio n shows the broad segment of the
traveling public, including businesses, educational institutions and other
enterprises that will benefit from the proposed Strategic Plan.



### Market Reach and P otential

AZO has a large close in population compar e d to other airports of its size. Within

a 25

- mile radius is a population of approximately 455,000; expanded to 50 miles
the population increases to over 1.7 million.
AZO’s primary catchment area , shown in

Exhibit 3.1 , has a popu lation of almost

540,000 re sidents and covers 2,562

square miles.

Population is expected to grow six percent

from 2010 to 2020 while household income is
anticipated to grow by 51 percent. Comparatively, the state of Michigan
population is projected to gro w by

four percent.

While AZO enplaned over 141,000

passengers in 2010 , an estimated 68 percent

of local travelers diverted from the area and
used other surrounding airports including
Detroit, Chicago O’Hare, and Grand Rapids

. Table 3.1 shows an estimated drive time from
the Kalamazoo community to each of these
airports. The primary diversionary airport is
Detroit with 28 percent of the catchment area

mak ing the almost two

- hour drive. At a
reimbursable rate of 55 cents per mile, this is costly to local businesses adding almost $140
per trip and a loss of employee productivity

. 

# A

TABLE 3.1 DRIVE TIME TO ALTERNATE AIRPORTS
DIVERSION
AIRPORT MILES ESTIMATED
DRIVE TIME % DIVERSION
FROM AZO Grand Rapids 59 1.0 hour 12 Lansing 79 1.2 hour 1

South Bend 82 1.3 hour 1

Detroit 124 1.9 hour 28 Chicago O'Hare 162 2.6 hour 17 EXHIBIT 3.1 AIRPORT CATCHMENT AREA

This section contains:
Description of the

Kalamazoo/Battle Creek

communities in relation to

air service to demonstrate

the benefit to a broad
segment of the traveling
public.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Environment** 

### 5



### Large and Diverse Employers

The AZO catchment area has a d ynamic and growing local business community
with significant air travel demand. Within AZO’s catchment area are several
major employers with extensive travel requirements. Southwestern Michigan is
home to a number of Fortune 500 companies including: Kellogg Company,
Whirlpool Corporation, Stryker Corporation, Parker Hannifin, Pfizer and

Eaton Corporation.

• : Kellogg’s home town and world **Kellogg Company**

headquarters located in the “Cereal City” of Battle

Creek is a 30

- minute drive to AZO. Kellogg is the

w orld’s largest producer of cereal and convenience

foods.

• : The World headquarters for **Whirlpool Corporation**

Whirlpool Corporation , an appliance manufacturer, is
located in Benton Harbor, Michigan and is a 60

- minute drive to AZO.

• : Stryker Corporation’s World **Stryker Corporation**

Headquarters is within walking distance to AZO’ s

terminal

, and Stryker’s Instruments and Medical
Divisions are only minutes away. With four of 13

divisions located within five miles of AZO this leader
in the design and manufacturing of medical device
products employs more than 2,500 employees in the

ar ea.

• : Parker Hannifin is a d iversified **Parker Hannifin**

manufacturer of motion and control systems and
hydraulic systems. Both Parker Aerospace

– Hydraulic Systems Division and Parker Pneumatic
Division are headquartered 10 minutes from AZO.

• : Pfizer, p harmaceutical research and **Pfizer**

development and manufacturing , has its t hird largest
presence in North Ameri ca with 4,300 local
employees. The Kalamazoo area is the g lobal
headquarters for Pfizer

– Animal Health Division and

is l ocated 10 minutes from AZO.

• : The h eadquarters, r esearch **Eaton Corporation**

and e ngineering for Eaton Vehicle Group, Americas

is l ocated just 15 minutes from AZO. Eaton d esigns
and produces transmissions, clutches and hybrid

sy stems for trucks and commercial vehicles.

Other m ajo r e mployers include Denso Manufacturing, Perrigo Company , and

MPI Research

. Denso Manufacturing is less than 30 minutes from AZO 

### “ It’s so convenient to be right across the street.

Within a **worldwide**

**operation** , we need to
have access to a good airport. ”

(J. Patrick Anderson,

VP of Strategy and

Communications for Stryker)Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Environment** 

### 6

employing approximately 3,100. Denso Manufacturing is a leader in design and
production of advanced automotive heating and cool ing components and

systems. Perrigo’s world headquarters are located in Southwest Michigan and is

the w orld’s largest manufacturer of over

- the

- counter pharmaceutical and
nutritional products for the store brand market. Perrigo employ s 2,500 residents

less than 45 minutes from AZO. MPI Research’s w orld h eadquarters is also

located in the area. MPI focuses on the non

- clinical research needs of the
pharmaceutical, biotechnical, chemical, agricultural and related industries and
employs 1,500 just 20 minutes from AZO.

Improving air service at AZO will enhance future regional economic development
efforts. Southwest Michigan companies (including Fortune 500 corporations like
Pfizer, Whirlpool, Stryker, and Kellogg) rely on commercial air transportation in
order to conduct business in our global economy, and they consider the quality of
AZO’s air service as a determining factor for location or expansion in the
Southwest Michigan region. These companies and ot her major regional
employers have significant ties to locations beyond the Midwest.



### Higher Education

E xpanded service at AZO will benefit colleges and universities throughout
Southwest Michigan. Each year, thousands of students travel back and forth from
domestic and international locations to attend Western Michigan University,
Kalamazoo College, Kalamazoo Valley Community College, Kellogg Community
College, Southwest ern Michigan College and other local educational institutions.

There are o ver 45,000 col lege students in the local area and 220,000 students

within a 75

- mile radius

.

• : US News & World Report lists Western **Western Michigan University**

Michigan University as one of the nation’s Top 100 public universities.
Approximately 25,000 students attend the University from over 110

countries

, and the University has more than 4,500 faculty

. The
University is 15 minutes or less from AZO

.

• : Kalamazoo College was r anked 52nd in Forbes **Kalamazoo College**

Magazine’s second annual list of America’s Best Co lleges. In 2010
1,369 students from 40 states and 25 countries attended the college.

• : Located in downtown **Kalamazoo Valley Community College**

Kalamazoo, e nrollment in the last fiscal year exceeded 17,000 students.

• : Kellogg Community College is located in **Kellogg Community College** 

Battle Creek with enrollment nearing 14,000 students.

• : The Dowagiac campus is less than **Southwest ern**  **Michigan College**

50 miles from AZO

, and the Niles campus is just 60 miles from AZO.
Annual enrollment is approxi mately 3,000 undergraduates. 

### Over 45,000 students

attend schools in AZO’s service area, and 220,000 students

are within a 75

- mile

radius.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Environment** 

### 7



### Tourism

Tourism is Michigan’s number two industry. Successful tourism initiatives in
Southwest Michigan require that travelers have the ability to move in and out of
the region efficiently and cost effectively. Air service improvements at AZO will
help attract more visitors to the state for meet ings, vacations and conferences.
The following is a list of just some of the events drawing v isitors to

Southwest Michigan.

• : In **International Food Protection Training Institute (IFPTI)**

collaboration with the US FDA this non

- profit organization located in
Battle Creek trained 300 food protection specialists from 30 states in

2009. This increased to 1,000 in 2010 and 2

- 3,000 in 2011.

• : Boys championships held in **USTA Boys National Championships**

August in Kalamazoo for the last 67 years brings more than 400 j unior
(18s and 16s) tennis stars and their families from all over the nation.

• : The c onference **The International Congress on Medieval Studies**

begins in May each year but lasts through the summer. Typically the

conference brings in more than 3,000 people fro m all over the world.

• : ESPN covers this **Girls Big League Softball World Series**

competition every August with regional teams from the US, Canada,

Latin America, Asia

- Pacific and Europe.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service –** **Existing and Historical** 

### 8



# Air Service

**– Existing** 
**and Historical**

his section provides an overview of existing air service at AZO

. Carriers
providing service, service frequency, nonstop destinations and equipment
types are included in the discussion. A summary of historical air service is
also included with destinations, traffic levels, service providers, average

airfares and an overview of extenuating factors that have affected air service. A
description of air service development efforts concludes th e section.



### Existing Air Service

Despite steady increases in population and a
stable economy, air service offerings from
Southwest Michigan have decreased steadily
since the mid 1990s, and as a result, many

local travelers are currently forced to drive
more than an hour to distant airports in order to
obtain adequate air service. This problem has
been compounded by the fact that Southwest
Michigan Regional Airport (BEH), located 40
miles west of AZO, has been witho ut
commercial airline service since August 2000,
leaving AZO as the only airport in the region

support ing scheduled passenger

airline service.

AZO enjoys scheduled airline service to hubs
throughout the upper Midwest including
Chicago, Detroit, and Minneapolis and less
than daily service to Florida markets including

Orlando and Punta Gorda with seasonal

service to West Palm Beach ( Exhibit 4.1 and

Table 4.1 ). Detroit and Chicago together

account for 86 percent of the AZO flights to

Network hubs and are each less than a three

hour drive from Southwest Michigan. Because
the majority of AZO’s c onnecting hubs are
geographically constrictive, they cannot be

considered market

- critical flight destinations
by themselves. 

# T

TABLE 4.1 AZO EXISTING AIR SERVICE
NONSTOP DESTINATION MARKETING CARRIER AIRCRAFT WEEKLY
DEPT WEEKLY SEATS

Chicago, IL (ORD) American ERJ (jet) 26 1,144

ERJ

- 145 (jet) 7 350 Detroit, MI Delta CRJ

- 200 (jet) 42 2,100 Minneapolis, MN Delta CRJ

- 200 (jet) 12 600 Orlando, FL (SFB) Direct Air B 737

- 400 2 298 Punta Gorda, FL Direct Air B 737

- 400 2 298

Total 91 4,790 Source: apgDat, July 2011

This section contains:



### • Existing air service



### • Historical air service



### • Air service development

efforts

EXHIBIT 4 .1 AZO EXISTING AIR SERVICEProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service –** **Existing and Historical** 

### 9



### Historical Air Service

The number of airlines serving AZO, daily scheduled flights, and nonstop

destinations offered from AZO have decreased significantly over the past 10

years

. This subsection summarizes AZO’s air service history including:
destinations, traffic levels, service providers and airfares. Extenuating factors that

have affected air service over time is also reviewed.



### D **estinations, Service Providers and Traffic Levels**

Annual airport passenger enplanements, which peaked at 282,348 in 1998, have
decreased by 40 percent since 2001 , despite population growth of approximately

four percent since 2000

. Exhibit 4.1 show s the sig nificant decrease in
enplanements , departures and seat capacity that AZO is experiencing. AZO’s
decline in passenger enplanements is largely due to fleet shifts, decreasing seat
capacity and the overall economic health of several legacy carriers.

EXHIBIT 4.1 HISTORICAL DEPARTURES , SEATS AND ENPLANEMENTS

Source: apgDat; Airport records

Table 4. 2 , next page, provides average weekly departures and seats by

destination and airline from 200 1 through 2011

. In 2001, AZO had 235 weekly
departures and 10,702 average weekly seats. Departures and

, for the most part

, seats have declined every year thereafter reaching an 11

- year low in 2011 of 91
departures . Overall departures decreased 61 percent and seats have decreased

55 percent. 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,0002001200220032004200520062007200820092010Seats/EnplanementsDepartures

Calendar year

Departures Seats Enplanements 

### Annu al airport

passenger enplanements have

decreased by 40 percent since 2001 despite population growth.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service –** **Existing and Historical** 

### 10

TABLE 4.2 HISTORICAL DESTINATIONS AND SERVICE PROVIDERS

DESTINATION AIRLINE ITEM MONTH OF JULY

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Atlanta, GA Delta Dept 7 7

Seats 350 280

Chicago, IL

(ORD) American Dept 34 35 26 27 28 28 35 34 33 33 33

Seats 1 ,700 1,708 1,252 1,332 1,400 1,400 1,666 1,658 1,578 1,536 1,494

United Dept 35 34 21 28 28 28 21 20

Seats 1 ,372 1,700 1,050 1,400 1,400 1,400 1,050 1,000

Cincinnat i, OH Delta Dept 28 28 35 35 35 20 18 17

Seats 1,400 1,148 1,372 1,120 1,750 800 666 798

Cleveland , OH Continental Dept 18 23

Seats 342 437

Detroit, MI Delta/
Northwest Dept 66 54 56 52 48 42 41 41 54 52 42

Seats 3 ,547 3,175 3,635 3,215 2,556 2,176 1,826 2,738 2,492 2,296 2,100

Minneapolis, MN Delta/
Northwest Dept 14 14 14 14 14 7 7 7 13 7 12

Seats 1 ,243 700 700 833 966 350 350 350 650 350 600 Orlando, FL (SFB) Direct Air Dept 2 2 2

Seats 30 0 300 300

Pittsburg h, PA US Airways Dept 27 27

Seats 864 864

Punta Gor da, FL Direct Air Dept 2 2

Seats 300 300

Toronto, Canada Air Canada Dept 13

Seats 2 34 Average weekly departures 235 192 175 156 153 132 129 119 102 9 6 91 Average weekly seats 10,702 9,295 8,446 7,900 8,072 6,476 5,838 6,544 5,02 0 4, 7 8 2 4,79 4 Source: apgDat



### Historical Average Fares

Over the last five calendar years, AZO ’s average fares have far exceeded
Chicago, Detroit, Grand Rapids, Lansing, and South Bend airports in each year
( Table 4.3) . In 2010, AZO’s average fares exceeded these surrounding airports
by 46 to 48 percent with th e exception of Lansing that was a 14 p ercent variance

. **AZO’s average fare**  **exceeded the average for the state of Michigan by 46**

This clearly indicates that **percent and the US national average by 52 percent.**

AZO is significantly overpriced and in need of additional service in the market.

TABLE 4.3 AVERAGE ONE

- WAY FARE PAID

AVERAGE FARE AZO %
DIFF 2006 2007 2008 2009 2010

AZO $195 $198 $221 $210 $240 Chicago (ORD) $148 $148 $164 $147 $164 47

Detroit $146 $140 $154 $143 $162 48 Grand Rapids $176 $177 $196 $172 $165 46 Lansing $164 $164 $179 $190 $210 14

South Bend $160 $156 $166 $150 $165 46

Michigan $151 $146 $162 $149 $165 46

US $149 $149 $160 $144 $158 52 Source: Data Base Products, Inc.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service –** **Existing and Historical** 

### 11



### Extenuating Factors that have A ffected A ir S ervice

A lack of non stop air service to high

- demand business destinations outside the
upper Midwest and substantially higher comparative airfare s than surrounding
airports, remain two major obstacles, prevent ing legitimate competition between

AZO and other surro unding and similar sized airports. This also prevents the
development of the Southwest Michigan market as a whole.



### Past Air Service Development E fforts

AZO has taken a proactive approach to improving air
service. The airport’s marketing plan contains a number of
initiatives related to increasing the use of AZO and its
existing carriers, while providing opportunities for new

carriers t o enter the market. AZO has worked to fill the three

main air service needs of Southwest Michigan:

1. Add new routes with existing carriers

2. Add additional airline carriers as demand warrants

3. Secure low

- fare service

Table 4.4 provides an overview of the air s e rvice
development efforts since 2005. TABLE 4.4 PAST AIR SERVICE DEVELOPMENT EFFORTS

YEAR INITIATIVE

2005 Task Force meetings

Route forecast

- AA/DFW SCASDP grant

- DL/ATL service initiation

2006 ACI

- NA JumpStart Conference

- Met with DL/F9/G4/NW Headquarters meeting with Frontier Airlines for
DEN service

2007 Submitted response to Frontier Airlines' Request for Proposals
Network USA Conference Developed Air Service Retention and Expansion
Committee
ACI

- NA JumpStart Conference Headquarters meeting with Continental Airlines
for CLE service

2008 ACI

- NA Air Service Planning and Data Seminar

ACI

- NA JumpStart Conference Airline Incentive Program finalized and published Business Travel Survey

Network USA Conference Passenger Demand Analysis

- retention/diversion study

2009 Air Service Marketing Brochure

ACI

- NA JumpStart Conference Passenger Demand Analysis

- retention/diversion study

2010 Airfare monitoring

Network USA Conference

ACI

- NA JumpStart Conference

True Market Estimate

- updated retention/diversion study

2011 Airfare monitoring

Route forecast

- F9/MKE

Network USA Conference

ACI

- NA JumpStart ConferenceProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Needs and Deficiencies** 

### 12



# Air Service **Needs and**
**Deficiencies**

he Air Service Needs and Deficiencies section identifies the issues at

AZO that have limited the growth of commercial air service to the
community

. This section provides a detailed analysis to demonstrate that
the average airfares are excessively high in this community compar ed to

other communities and that AZO is under served

.



### Higher Than Average Fares

The lack of competitive service at AZO has led to airfares significantly higher
than surrounding airp orts

. Table 4.3 showed that average airfares have generally
been 50 percent higher than most airports in the region

. T able 5. 1 ill ustrates the
fare inequities to AZO’s top markets that would flow over Dallas compared to

Detroit

, Chicago and Grand Rapids where passengers frequently drive for
greater travel options or due to airfare differentials.

TABLE 5.1 AIRFARES AT TOP DOMESTIC AZO

- DFW CONNECTING MARKETS

RANK TOP DESTINATION AVERAGE ONE

- WAY FARE AZO PREMIUM OVER

AZO DTW GRR ORD DTW GRR ORD

1 Dallas, TX (DFW) $222 $183 $186 $191 $39 $36 $31

2 Orange County, CA $243 $184 $210 $192 $59 $32 $51

3 Sacramento, CA $265 $179 $197 $210 $86 $68 $55

4 Las Vegas, NV $207 $148 $145 $174 $59 $62 $33

5 Los Angeles, CA $254 $201 $167 $202 $53 $87 $52

6 Phoenix, AZ (PHX) $214 $168 $169 $167 $47 $45 $48

7 Albuquerque, NM $240 $140 $171 $155 $99 $69 $85

8 San Jose, CA $282 $162 $218 $192 $120 $64 $90

9 San Diego, CA $265 $194 $204 $189 $72 $62 $77

10 Tucson, AZ $208 $156 $181 $170 $52 $27 $38

11 Houston, TX (IAH) $283 $200 $211 $168 $82 $72 $114

12 Austin, TX $218 $181 $189 $166 $37 $29 $52

13 San Francisco, CA $286 $231 $185 $222 $55 $101 $65

14 Seattle, WA $270 $210 $195 $195 $60 $74 $74

15 San Antonio, TX $285 $172 $170 $167 $113 $115 $119

16 El Paso, TX $245 $172 $250 $183 $73 ($4) $62

17 Ontario, CA $288 $166 $224 $172 $122 $64 $117

18 Baton Rouge, LA $234 $154 $180 $160 $79 $54 $73

19 Jackson, MS $297 $203 $239 $157 $94 $59 $141

20 Killeen, TX $297 $201 $246 $166 $97 $51 $131

21 Fort Walton Beach, FL $405 $158 $143 $135 $248 $262 $271

22 Shreveport, LA $350 $271 $282 $250 $79 $68 $100

23 Amarillo, TX $245 $206 $216 $180 $39 $29 $65

24 Lubbock, TX $289 $147 $199 $150 $142 $90 $139

25 Corpus Christi, TX $327 $234 $240 $210 $93 $87 $117

All Domestic Markets $240 $162 $165 $164 $78 $75 $76

Source: Data Base Products, Inc. 

# T This section contains:

AZO’s air service needs

and deficiencies



### AZO is significantly

overpriced when compared to other airports where

catchment area passengers look for

reasonable airfares.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Needs and Deficiencies** 

### 13

On average to th e top 25 AZO

- Dallas destina tions, AZO’s fares are $84 higher

one

- way than Detroit, $68 h i gher than Grand Rapids, and $88 higher than
Chicago. Nonstop Dallas service will help to alleviate these extremely high fare
differentials by increasing available seats and crea ting new connecting options

.

On a market by market basis, AZO fares are higher than alternate airports
typically used by Kalamazoo area passengers. Local Kalamazoo companies
prefer to originate travel at AZO and understand the need for reasonable
premiums over hub airfares; however, the premiums are so high that they
continually have to compare this additional cost to the lost time required to drive

to an airport outside the catchment area.



### Underserved Market Driving High Diversion

AZO has an estimated true market of almost 825,000
origin and destination passengers annually; however,
current air service only meets the needs of 32 percent of

those travelers. **Sixty**

**- eight percent of travelers are** 

**making the costly drive to alternate airports to obtain** 

Table 5.2 provides AZO’s true **sufficient air service.**

market and retention for top markets and AZO in total.

Diversion to alternate airports is even worse in several of
the top 15 markets. AZO retains only 10 percent of the
passengers destined for their top international market,
Cancun, Mexico. In Florida markets such as Tampa and
Orlando (MCO) AZO retained 23 to 25 percent of
travelers. These low retention rates are a strong indicator
of the need for improved air service and additional
options for air travel in the Kalamazoo community.



### Unmet Business Travel Demand

AZO’s catchment area is home to several major employers with extensive travel
requirements. Stryker Corporation’s World Headquarters is within walki ng distance to the AZO terminal and other divisions are minutes away. The World
Headquarters of Kellogg Company, Whirlpool Corporation, Perrigo Company and
MPI Research are all within a short drive to AZO and support the local airport.

Parker Hannifin, Pfi zer, Eaton Corporation and Denso Manufacturing each have
major divisions and presence within the catchment area. The reduction in AZO
air service has had a significant impact on these companies.

In recent years AZO ’s air service has been impacted by airli ne bankruptcies,
mergers and strategic shifts in capacity designed to lower carrier costs as fuel
prices peaked and carriers were forced to realign or eliminate fleets and hubs. TABLE 5. 2 KALAMAZOO AIRPORT'S TOP 15 CATCHMENT AREA TRUE MARKETS

RANK MARKET RETENTION
% TRUE
MARKET

SIZE

1 Orlando, FL (MCO) 25 24,550

2 Newark, NJ 26 23,841

3 Las Vegas, NV 25 22,571

4 New York, NY (LGA) 32 22,557

5 Atlanta, GA 32 21,905

6 Los Angeles, CA 35 21,560

7 Orlando, FL (SFB) 100 19,794

8 Phoenix, AZ 29 19,654

9 Minneapolis, MN 34 19,424

10 Denver, CO 21 18,492

11 Dallas, TX (DFW) 34 18,467

12 Washington, DC (DCA) 45 17,679

13 Tampa, FL 23 17,173

14 Cancun, Mexico 10 13,244

15 Philadelphia, PA 30 13,235

All markets 32 824,703 Source: Mead & Hunt Passenger Demand Analysis 2010Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Air Service Needs and Deficiencies** 

### 14

AZO service to Atlanta that was inaugurated with the help of a SCASDP grant

wa s lost as fuel prices increased and carriers looked to avoid overflying hubs
when they could connect via closer hubs like Cincinnati. AZO also lost service to
Pittsburgh, Cleveland and Cincinnati hubs as carriers merged or realigned their
operations. As ca pacity was removed from many other markets the carriers were
rewarded with the expected higher load factors. The strong business market at
AZO needs frequencies and good con nections throughout the country. A s network capacity and options were reduced the b usiness passengers were
forced to drive to other airports to satisfy their travel needs. Connections to the
South have been a particular problem.

Nonstop service from AZO to the American Airlines Dallas hub creates online
single connections to 77 cities not currently served through Chicago, Detroit, or
Minneapolis including 27 international cities in Mexico, Central and South
America. The 50 new US connecting destinations span the southern US from
Florida to California where there are key cities that are only well served from
hubs in the south. The local nonstop market to Dallas has also been a top
destination for AZO travelers who will benefit from nonstop service.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Air Service** 

### 15



# Strategic Pla **n**

**– Air**  **Service**

he Strategic Plan proposed by AZO will achieve the communit y’s goals

and reduce it s air service deficiencies

. This Strategic Plan section
provides a detailed description of the goals of the project and a primary

and alternate plan for attaining those go als.



### Project G oals

The project goal of this SCASDP grant application is to improve air service to
high demand markets in the Southern part of the US , Mexico, Central and South

America and to create new connecting opportunities to smaller markets not
currently available from AZO

. By meeting this goal airfares will be reduced and

the need for air travelers to drive long distances to access adequate air service to
many important destinati ons will be mitigated

.



### Proposed Air S ervice

AZO is only retaining 32 percent of catchment area passengers because air
travelers are driving long distances, primarily to Detroit and Chicago

, to access
the national air transportation system. With limited service to Northeastern hubs,
AZO lacks online single connect service to many key destinations in the
Southern part of the United States as well as international service to Mexico,

Central and South America.

This plan will achieve the project goal s by:



### • A dding nonstop service to Dallas, one of the largest destinations for

local air travelers



### • Reducing the need for air travelers to drive to Detroit and Chicago for
affordable and competitive airfares



### • Adding online single connection service to up to 50 cities in the
Southern part of the US as well as 27 international destinations,
primarily to Me xico, Central and South America



### Airline P articipation

In recent years, AZO has engaged in discussions with A merican Eagle regarding
improving overall service and adding nonstop service to their Dallas hub

. Recent

discussions with American Eagle have been positive and have centered

on Dallas

. 

# T This section contains:



### • Strategic Plan for

meeting AZO’s air

service needs and

deficiencies



### • Alternate plan to meet

the goalProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Air Service** 

### 16



### Market A nalysis

A financial analysis and pro forma route forecast have been developed for

American Airlines/American Eagle service to their Dallas hub

. R esults of the

American/ A merican Eagle service analysis is summarized below

. The complete
analys i s for Dallas service for both a one and two roundtrip schedule is included

as Appendix C

, Detailed Market Analysis

.



### Forecast Assumptions

Pro forma route forecast p rojections were completed for a one and two roundtrip

schedule on a 44

- Seat Embraer ERJ

- 140

. The analyse s include the operating
and marketing assumptions listed below:



### • Existing passengers will be div ided between American/American Eagle

and Delta Air Lines based on the number of reasonable connections

available in the market.



### • The Dallas local market will be stimulated 25 percent for one roundtrip
and 50 percent for two ro undtrips.



### • American/ American Eagle will capture a share of the passengers that

are drivin g to competing airport s (i.e

. Detroit and Chicago ) to travel to

Dallas and cities beyond Dallas

.



### Mature Market Results

Table 6.1 provides a summary of

the American/ American Eagle

Dallas market analysis for one roundtrip per day on the 44

- seat

Embraer ERJ

- 140

. Passenger
projections were based on a
mature market (i.e., passenger
projections would be at 100
percent on the fir st day of
service). It is estimated that one roundtrip per day will generate $ 7.7 million in annual revenue for
American/American Eagle

. Projected system profit surpass es $ 2.0 million

.



### Airline Risk Ramp

**- Up**  **Risk**

I t is estimated that American/American Eagle will earn a system profit of over $ 2.0 million after the market matures

. Although this market is projected to be self

sustaining in the long

- run, American/American Eagle will not generate this
amount of revenue or margin at start

- up. Airlines typical ly incur losses in new
markets during the first year of the ramp

- up period. Adding t o initial economic risk

in the market is the challenge of changing existing travel habits and airline TABLE 6.1 AZO

- DALLAS MARKET ANALYSIS

ITEM STATISTICAL CATEGORY MATURE
MARKET

1 Seats per departure 44

2 Segments per day 2

3 Onboard Passengers 25, 926

4 Load Factor 81%

5 Average Fare (all markets) $ 287

6 System revenue $7, 671,146

7 System profit $ 2,109,209

Source: Mead & Hunt, Inc. 

### T he Strategic Plan

is critical in American Eagle’s

decision whether

or not to serve
AZO to Dallas/Fort

Worth.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Air Service** 

### 17

allegiance which will take time. This could cause a longer than normal ramp

- up period and lead to significant losses in the short

- term

.

Table 6.2 provides an adjustment to passenger projections to account for ramp

up to a fully mature market and breaks down the passenger projections for the

first 12 months. At service initiation, it is conservatively estimated that
American/American Eagle will realize 70 percent of the potential revenue in a

mature market. The market will mature during the first year

. The ramp

- up period
is highly dependent on service awarenes s and the community’s support of the

new service. Table 6. 2 also provides the estimated loss by month and in total for

the first 12 months of service. AZO

- Dallas segment revenues adjusted for the

ramp

- up period for the first year of service total $3.8 mill ion. The total shortfall is expected to be $ 526,034 for the first year of service.

TABLE 6.2 SERVICE RAMP

- UP

MONTH SEASONALITY RAMP

UP LOAD FACTOR REVENUE COST
PER
MONTH NET SURPLUS/
SHORTFALL April

- 12 8.6% 70% 59% $265,952 $356,400 ($90,448) May

- 12 8.0% 73% 56% $260,388 $368,280 ($107,892)

June

- 12 8.0% 76% 60% $268,601 $356,400 ($87,799) July

- 12 8.3% 79% 62% $289,947 $368,280 ($78,333) August

- 12 9.7% 82% 76% $353,468 $368,280 ($14,812) September

- 12 8.7% 85% 73% $329,107 $356,400 ($27,293)

October

- 12 9.2% 88% 77% $358,357 $368,280 ($9,923)

November

- 12 8.7% 91% 78% $351,330 $356,400 ($5,070)

December

- 12 7.9% 94% 71% $331,179 $368,280 ($37,101) January

- 13 7.2% 97% 66% $309,523 $368,280 ($58,757) February

- 13 6.9% 100% 73% $306,335 $332,640 ($26,305)

March

- 13 8.7% 100% 83% $385,979 $368,280 $17,699

Total 100.0% N/A 67% $3,810,166 $4, 336,200 ($526,034)

Source: Mead & Hunt, Inc.



### Alternate P lan

If AZO fails to obtain American Eagle service to Dallas

, alternate carriers will be
approached with the inten t of obtaining nonstop service to an other major hub that
would provide improve d air service to high demand markets in the Southern part
of the US, Mexico, Central and South America

. Alternate carrier service would
fulfill the goals of this grant application.



### Previous Grant Recipient

- New Project and Goals

In 2004, the US Department of Transportation (DOT) awarded the County of

Kalamazoo a SCASDP grant. The 2004 grant included the following goals:

• Collaborate with Delta Air Lines to promote current service

.

• Introduce new nonstop service on Delta Air Lines to Atlanta

.

• Improve access to Atlanta, Orlando and Tampa

.

• Allow for additional low

- fare seating

.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Air Service** 

### 18

The US DOT ’s portion of the p roject budget, $500,0 00, included partial funding of

a revenue guarantee, partial airport marketing

, air service proposals,
administrative costs related to new nonstop route negotiations and related

studies to evaluate the service and pilot program. The previous application’s
goals focused on Atlanta and Florida while the goals of this application are specific to the local Dallas market and connections to the entire Southern US as well as Mexico, Central and South America

. As demonstrated, this application
qualifies as a new pr oject and meets the requirements of the SCASDP

.

The County of Kalamazoo was successful in attracting Delta Air Lines ’ service to
Atlanta using funds made available through the US DOT grant. The service was
successful and the grant was closed with o nly a small portion of the US DOT

funds required because revenues exceeded expectations. Delta Air Lines
continued the Atlanta service until the end of 2007 when rising fuel prices led to a restructuring of hubs where AZO and several other airports in the regio n lost
Atlanta service in favor of connecting service over Cincinnati.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Implementation and Funding** 

### 19



# Strategic Plan

**– Implementation and**  **Funding**

his section, Strategic Plan

- Implementation and Funding , provides the
detailed incentive and support plan required to implement the Strategic

Plan. A legal sponsor responsible for administering the program has been
designated, and a public

- private partnership has been formed to actively
participate in implementing the propos ed project. In addition, this section

identifies self

- sufficiency of the service as an integral part of the community’s
goals and provides a description of the community’s plan to continue with the
project if it is not self

- sustaining after the grant award expires. A detailed
description of the funding necessary for implementation of the Strategic Plan,
including federal and non

- federal contributions, is included.



### Public

- Private P artnership

The County of Kalamazoo

, the
owner/sponsor of AZO , has been
designated as the sponsor of this grant
application

. The County of Kalamazoo

has formed a public

- private partnership

with two private entities (refer to
community support letters in Appendix

B

). Collectively, the partnership is
committed to completing the Strategic

Plan. Private partners in the public

private partnership include:

• Southwest Michigan First

• Kalamazoo County Convention & Visitors Bur eau

All partners in the public

- private partnership will be fully involved in the execution
of the Strategic Plan ( Table 7 .1 ). The County of Kalamazoo will execute all
federal grant offers, process all associated reimbursement requests and oversee
grant ad ministration. The County of Kalamazoo will also administer the revenue
guarantee

. AZO will be responsible for administering the $2 4 0,000 marketing
campaign in conjunction with Southwest Michigan First and Kalamazoo County

Convention & Visitors Bureau

. Together these partners form a team committe d to
improving air service at AZO

. 

# T

TABLE 7.1 PUBLIC

- PRIVATE PARTNER ROLES

PUBLIC

- PRIVATE
PARTNER ROLE

County of
Kalamazoo/AZO Grant and revenue guarantee administration and
assist with the local

marketing efforts Southwest Michigan

First; Kalamazoo County Convention &
Visitors Bureau Assist with local marketing efforts,
coordination of the marketing program This section contains:



### • Description of the public

private partnership



### • Legal sponsor



### • Funding for the Strategic

Plan



### • SustainabilityProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Implementation and Funding** 

### 20



### Incentive and Support P lan

In today’s airline environment, community
support packages have become
increasingly imp ortant and virtually required

for most new service

. To be effective,
support packages must be structured to
address the issues of new airline entry and
ensure that the market responds quickly.

The public

- private partnership proposes a
community support p ackage that has been
tested and proven to be successful. To

reduce American Eagle ’s breakeven period
and offset the risk during start

- up, the
public

- private partnership proposes the
following incentives ( refer to Exhibit 7.1 ) : m arketing campaign ( create service

awareness for the American Eagle Dallas hub ); r evenue guarantee ( reduce

airline risk ); and f ee waiver s ( reduce airline start

- up costs ).



### Marke **ting Campaign**

Any marketing campaign must be targeted toward aggressive promotion of the

service to make the new service successful and sustainable. The public

- priv ate
partnership understands and agrees with the US DOT that a thorough
understanding of the target market is essential for the success of new air service.

The 2012

- 2013 Marketing, Public Relations and Communications Plan created
by Lam & Associates is included as Appendix A

. Elements included in the
Marketing, Public Relations and Communications Plan include: EXHIBIT 7.1 INCENTIVE PLAN

Airline Risk Mitigation > Revenue

guarantee

> Fee
waivers

> Marketing U.S. DOT Airport Community Funding Service initiation 

# $ It is anticipated that

American Eagle would require a $500,000 revenue guarantee to initiate

service to Dallas.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Implementation and Funding** 

### 21

• Television and r adio
advertising

• Print advertising ( e.g.

newspapers, magazines )

• Outdoor advertising

• Soci al m edia

• Direct m ail

• Trade show and
marketing

Table 7.2 provides the marketing budget for the first and second year s of

service

. AZO has established an extensive partnership agreement with many

media outlets. This $ 2 4 0,000 marketing campaign will be funded by non

- airport sources ($ 1 1 0 ,000 cash and $ 30,000 in

- kind ) and AZO ( $ 100,000 cash )

.

TABLE 7.2 MARKETING BUDGET

MEDIA OUTLET YEAR 1 YEAR 2

TOTAL CASH IN

KIND CASH IN

KIND

Television $30,000 $0 $5,000 $0 $35,000 Print Advertising $30,000 $10,000 $7,500 $2,500 $50,000 Outdoor Advertising $30,000 $5,000 $7,500 $2,500 $45,000

Radio $10,000 $2,500 $5,000 $2,500 $20,000

Social Media/Web $10,000 $2,500 $5,000 $2,500 $20,000

Direct Mail $15,000 $0 $7,500 $0 $22,500 Trade Show & Marketing $5,000 $0 $2,500 $0 $7,500

Production fees $30,000 $0 $10,000 $0 $40,000

Total $160,000 $20,000 $50,000 $10,000 $240,000



### Rev **enue G uarantee** 

To reduce airline risk and provide incentive to American Eagle to provide nonstop

service to Dallas , this Strategic Plan includes a revenue guarantee as part of the
community support package. Although pro forma projections for Dallas service

are positive ( Appendix C ), service ramp

- up and breakeven can t ake up to 12
months, particularly in a market with significant barriers

- to

- entry. It is anticipated

that American Eagle would require a t least a $ 500 ,000 revenue guarantee to

initiate service to Dallas

. Exact terms of the revenue guarantee agreement are

su bject to furthe r negotiations

.



### Fee **W aive**  **r s** 

The air service support program includes a waiver of landing fee s, apron fees
and passenger boarding bridge fees

. As part of AZO’s standard rates and charges, signatory airlines are charged a landing fee assessed at $ 1.34 per 1,000 pounds of gross landed weight. AZO will waive landing fees for the first six months of any new, nonstop service, including Dallas

. Landing fees for the firstProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Strategic Plan –** **Implementation and Funding** 

### 22

six months are estimated at $ 11,170 assuming the use of the Embraer ERJ

- 140

with one ro undtrip daily. The landing fee waiver may vary depending on aircraft
type used and the number of roundtrips offered. Total fee waivers are estimated at $12,820.



### Strategic Plan Funding

The public

- private partnership is requesting US DOT assistance in funding 61 percent, or $ 5 0 0,000, of the Strategic Plan. Specifically, US DOT funding will be

used to fund the revenue guarantee

. AZO and the community will fund 39 percent of the total proposed air service program. Non

- airport funding source s will provide 14 percent of the cash requirement and 17 percent of the funding for the total program including in

- kind services ( Table 7.3 )

.

TABLE 7.3 STRATEGIC PLAN BUDGET

DESCRIPTION FUNDING SOURCE

TOTAL US DOT AIRPORT NON

- AIRPORT

CASH CASH IN

- KIND CASH IN

- KIND Airline incentive program: Marketing campaign

Year 1 $100,000 $60,000 $20,000 $180,000

Year 2 $50,000 $10,000 $60,000 Revenue guarantee $500,000 $500,000

Fee waivers $12,820 $12,820 Monitoring program $56,670 $56,670 Airline meetings/negotiations $13,680 $13,680

Total $500,000 $170,350 $12,820 $110,000 $30,000 $823,170 Percent of total project 61% 21% 1% 13% 4% 100%

Percent of cash contribution 64% 22% N/A 14% N/A 100%



### Project Continuation and Sustainability

Based on the positive pro forma projections for American Eagle service to Dallas,
it is anticipated that service will be self

- sustaining after the start

- up period which
can take up to 12 months or more. However, the public

- private partnership

understands that service failure is often due to the lack of awareness in t he community. Because of this, the Strategic Plan includes a $ 6 0,000 second

- year marketing program. In addition, should the revenue guarantee have remaining
funds, the public

- private partnership will use up to $100,000 for on

- going marketing of the Dallas route. The Kalamazoo/Battle Creek business community
and the public

- private partnership understand the economic importance of this
project to the region and the challenges associated with profitably operating air

service to the Kalamazoo market and will wo rk to ensure its long

- term success.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Schedule and Monitoring** 

### 23



# Schedule **and Monitoring** 

he public

- private partnership has developed a realistic timetable for

achiev ing the project goals

. This section provides critical milestones to be
achieved by the public

- private partnership to timely execute this air

service initiative

. A monitoring program is also provided to track the
progress of the project.



### M ilestones for Timely Completion of Project

The following target dates are proposed to t rack the progress of this air service

initiative assuming a grant award by December 31, 2011 :

TABLE 8.1 STRATEGIC PLAN SCHEDULE

DATE ACTION ITEM DESCRIPTION

January 1, 2012 Marketing campaign development Development of the marketing campaign will be completed in January 2012 in order to begin the marketing

campaign 60 days pr ior to

new service initiation.

February 1, 2012 Marketing initiation It is anticipated that the marketing campaign will begin by February 1, 2012 and continue throughout the

first year of new service.

April 1, 2012 Service initiation The service start date is the
critical date for the rest of the Strategic Plan. It is anticipated that American Eagle wi ll initiate nonstop

Dallas service in April 2012.

Air service initiation is dependent on airline route planning, economics and availability of right

- sized
aircraft for AZO.

June 30, 2012 Alternate plan If American has not

committed to a date to implement nonstop Dallas service by June 30, 2012,
AZO will contact other airlines

th at would meet the goals of this grant application.

March 31, 2013 Revenue guarantee contract completion At the end of the first year of service, the revenue guarantee will be calculated

based on the terms of the agreement. T he revenue guarantee contract term will

be based on the service

start date. 

# T This section contains:



### • Monitoring the project



### • The plan/schedule for

timely completion of the
projectProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Schedule and Monitoring** 

### 24



### Strategic Plan M onitoring P rogram

The monitoring program includes service performance tracking, assessing the
effectiveness of the campaign, impact on airfares and determining the influence

of new service on retention at AZO

. Table 8.2 provides the action items and
frequency to monitor the Strategic Plan over a two

- year period

.

TABLE 8.2 STRATEGIC PLAN MONITORING

FREQUENCY ACTION ITEM DESCRIPTION

Monthly Airline performance Load factors, enplanements, departures Revenue guarantee

indicators Ticket revenue, cost, drawdown

Quarterly Airline performance Load factors, enplanements, departures, revenue per available

seat mile

Airfares Compare US DOT airline reported average airfares on a quarterly basis,

when available, to prior quarters

Published airfares will be monitored
for the first three months of service then quarterly thereafter via one of the Global Distribution/Computer Reservations Systems (GDS/CRS)

9 Months Program assessment Complete an overall assessment of the program to determine if additional

community marketing support is needed beyond one year

12 Months Passenger Demand Analysis Conduct a follow

- up true market estimate to determine changes in passenger diversion after the first 12
months of service. By comparing to

the true market estimate conducted

prior to service initiation, the true

market estimate will determine the impact of the air service improvements on retention/diversion

at AZO

.Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Appendix A. Marketing, Public Relations and Communications Plan**  

### 25



# Appendix A. **Marketing,**
**Public Relations and Communications Plan** 

he following is the 2012

- 2013 Marketing, Public Relations and

Communications Plan prepared by Lam & Associates. This Plan is in
direct support of and prepared for the proposed air service in the Strategic

Plan

, imp roved air service to high demand markets in the Southern part of the
US, Mexico, Central and South America

. 

# T This section contains:
The detailed marketing plan
to support the service
proposed in the Strategic

Plan.

### l 

# am & 

# associates

AUGUST 2011 

# 2012-2013

MARKETING, PUBLIC RELATIONS

AND COMMUNICATIONS PLAN

# Situation Analysis/Background

The Kalamazoo/Battle Creek International Airport (AZO) revitalized its strategic marketing efforts in 2009 in concert with strategic efforts associated with the construction of the new airport terminal, which opened in April of 2011. In the same time frame, the airport has undertaken an update of its Master Plan.

The marketing, public relations and communications plans have been aligned not only with the strategic directives of the Aeronautics Board, but also with the overall community revitalization and economic development strategies. The strategic marketing plans highlight the airport’s role in a community which is designing its own future, in many ways uniquely. In very recent national rankings, Kalamazoo has been recognized among the “Best Cities for Recent College Graduates,” “Best Cities for Young People,” and “Best Places to Start Over.” The Center for Michigan, a respected “think-and-do tank,” will release data in September showing positive housing statistics “completely different” from the rest of the state, an obvious reflection of the effects of the Kalamazoo Promise, which translates into a quarter-billion-dollar investment in education that provides high school graduates free college tuition for nothing more than attending and graduating from Kalamazoo Public Schools.

On top of that, Western Michigan University has just received a $100 million gift to make possible the creation of a medical school in the community in the next few years, a project that is now well under way. Similarly, community investments through venture capitalists, Southwest Michigan First and others are resulting in the resurgence of the life sciences, capitalizing on the brainpower of a community with a legacy of medical and pharmaceutical excellence.

Kalamazoo has historically withstood the cyclical effects of downturns because of its diversified economic base, with unemployment rates running consistently and considerably below both the state and national averages (Upjohn Institute for Employment Research, June, 2011).

With the election of a new governor and the prospects of a more favorable business climate in Michigan, current economic projections remain a challenge, but Kalamazoo County “below-the-surface” trends make the community a fascinating market for business exploration and risk/reward.


# Example: In an already-strong downtown setting, with high retail, commercial and residential occupancy rates, some $51 million in new projects are either near completion or on the drawing board, including a new eight-story building across the street from the four-diamond Radisson, where some $17 million in improvements are scheduled through next fall. Moreover, the forces of community self-determination throughout Kalamazoo County continue to work together on several fronts, including the airport, to invest in future growth.


# Example: “The Learning Network” just announced $11 million in new education grants, on the way to a $60 million community alignment project to improve the quality of life in the region. Specifically on the airport, the Chamber of Commerce, the Convention & Visitors Bureau (CVB) and Southwest Michigan First have contributed time and talent to efforts to grow and improve the airport.

The airport utilizes $50,000 a year of designated funds from the CVB to market itself at key events which attract travelers to Kalamazoo County, such as the USTA National 16-18 Boys Tennis Tournament.

2012-2013 MARKETING, PUBLIC RELATIONS AND COMMUNICATIONS PLAN / AUGUST 2011 / PAGE 2

# Market Analysis & Response

The importance of the needs of the business community has never been lost on AZO. When Stryker Corp., with its 13 divisions, built new world headquarters literally on the doorstep of the airport in 2006, company leaders erased any doubt about their support of a facility that would be part of an overall economic revitalization plan. From a strategic marketing point of view, without adopting plaintive or defensive tones, the airport messages since 2009 have prepared the business community for entry into a new era of prosperity.

Those messages were reinforced through virtually every communications vehicle aimed at the business community, including well-targeted business publications and a continuously updated mailing list of business leaders and community influentials. The underlying theme of “Safe. Simple. Convenient,” ties into an informal mantra of connectivity to this airport. The beauty of the timing, though, was the construction of the new terminal, a blessing that linked the airport’s “New Beginnings” message with a growing sense that Kalamazoo would be a player in leading Michigan out of the doldrums.

At every possible turn, the airport is associating itself with the growing sense that community momentum -- by no means assured -- is real. Transferring that sense of momentum to the price-sensitive leisure and family travel community remains a significant task. Since 2009, AZO has sharpened its marketing focus by “coming clean” with the intention to compete head-on with worthy competitors, contrasting the safe, simple, convenient travel with road travel (icy and dark in winter and orange barrels in summer) associated with distant airports.

Without going all the way to direct “you’re worth it” messages, AZO has utilized the look and feel of the new terminal to open minds regarding the idea of “considering” and shopping Kalamazoo for the sake of paying a premium for convenience. The countervailing forces include the availability of direct flights from other airports -- which is being addressed in this grant application -- and the issue of “reliability.” When a flight is cancelled from Detroit or Chicago, the promise of convenience
takes a direct hit.

This is an airline issue that every airport faces, but small- to medium-sized airports with fewer fallback options for the “next flight” are affected more dramatically.



## THE MARKETING CHALLENGES FACING AZO ARE
MANAGEABLE FOR THE FOLLOWING REASONS:

• Incredibly strong partnerships among business, education, civic, governmental

and influential forces; • The ability to target audiences with select, regionally focused media;

• Warm and welcome visitor response to the amenities, feel and layout of the

new terminal; and • Adequate resources to deepen important messages.



### Demographically, an overall snapshot of the catchment area would not prove to be dissimilar to that of 20 years ago, but according to preliminary census figures, Kalamazoo and Allegan counties grew roughly 5 percent in the past decade, compared to a population drop in Michigan.

Worth noting is the buzz surrounding the area’s appeal to young families, combined with gap or spread between Kalamazoo and the state and nation -- increasingly younger by relative comparison. Those factors don’t yet speak to buying power, but to the underlying vitality associated with the trend. Kalamazoo is one of the few urban school districts, ostensibly because of the Promise, to buck the decline of enrollment. Something’s going on here.

2012-2013 MARKETING, PUBLIC RELATIONS AND COMMUNICATIONS PLAN / AUGUST 2011 / PAGE 3

# Media Analysis & Response

Outside of the “business traveler” segment, for which AZO has a focused strategy, primary demographic segmentation is done by geography, age and income. Additionally, some assumptions regarding educational attainment can be made by conventional media. For example, it is fair to assume the proclamations by print media and public radio that they reach a more educated audience would appear to hold true.

Media alignment by geography is favorable. Geographic targeting is necessary because in many markets the “spill” outside the catchment area can be a waste. Because the “Southwestern Michigan” area is in direct competition with Grand Rapids, and because there is little reason to believe that Grand Rapids media spending would be fruitful, AZO is particularly mindful that Grand Rapids, Kalamazoo and Battle Creek are in the same media market for network TV, with Kalamazoo having the CBS affiliate and Grand Rapids dominating ABC, NBC and Fox.

The good news is that “local” news for Kalamazoo County is primarily watched by Southwestern Michigan viewers, not Grand Rapids viewers. Additionally, Charter and Comcast distribution regions align beautifully with AZO’s catchment area. AZO can buy cable television, using income and geographic parameters, in combination with the Channel 3 news programming. In the print realm, the dominant dailies are the Battle Creek Enquirer and The Kalamazoo Gazette. In addition to having a reach in several counties, The Gazette also has regional editions. The best demographic match-ups for AZO -- slightly older, more educated and more affluent listeners -- happens to be with stations that also have news coverage. One of those feels a strong alignment tothe airport and is offering in-kind matching dollars for this grant. The younger, lessaffluent audiences can be reached, but with less cost-effectiveness.

AZO uses outdoor advertising to reinforce other media to achieve “frequency,” and because it is a medium which, in essence, “can’t be turned off.” AZO also uses outdoors at select locations -- highways to other airports and as a reminder that AZO is nearby. Because of its scope and scale, outdoor also suggests that AZO is “in the game,” and can afford to compete with the larger airports.

Direct mail is used by AZO to reach high-income potential leisure travelers, as lists can combine income with geography, and post card messages, such as “Upgrade!” (referring to the new terminal), are attention grabbers. Electronic and social media strategies are evolving for AZO. HTML blast to select audiences, with an opt-out option could give way to facebook and Twitter, but the latter social media rely on news and updates, much of which in the airport world revolves around the airlines, not airports.

Additionally, the issues of cost and reliability, issues for AZO, are among the topics (security is another) that create the potential of “publish backlash,” and AZO is not currently in a position to assume the risk, but intends to carefully move forward on a social media strategy, particularly one that includes opt-in, opt-out and screening mechanisms. Like many airports, because of the Places feature and “community pages,” the airport has two community pages that have been used. So far, neither has been abused.

2012-2013 MARKETING, PUBLIC RELATIONS AND COMMUNICATIONS PLAN / AUGUST 2011 / PAGE 4

### AZO continues to refine its message to influentials and business travelers, deepening the message that there is a link between economic prosperity and the use of the airport.

The assumption here is that such a message falls on deaf ears with the leisure traveler. Blessed with a new terminal, however, the airport is able to capitalize on the momentum created by the “New Beginnings” campaign that was used in conjunction with the opening of the new terminal and an open house which attracted some 8,000 area residents. The challenges facing AZO -- primarily set forth by very worthy competitors -- demand creativity associated with the critical choice of comparison shopping.

The issues of safety, simplicity and convenience do not always carry the day, but the message strategy is one of reinforcing those themes, primarily at opportune times. Relieving cognitive dissonance of the business traveler is most certainly a goal of message development, so little is done in terms of creative to highlight the differentiation.

AZO, having studied virtually all marketing and advertising strategies of small, medium and medium-large airports across the country, is aware that “destination messages” are common, and for good reason.

The short hops to Detroit and Chicago, however, serve as a double-edge sword, and the message tends to be used on Internet banners (including on the AZO web site) highlighting more distant destinations, most notably Florida.

AZO would greatly welcome the opportunity to promote Dallas/Ft. Worth, not only for the sake of that route, but as a signal of diversity and distance of original destinations.

Public relations messages over the past two years have largely been associated with the construction of the new facility, traffic and enplanements at the airport, the new FAA tower and events and political decisions related to the airport. The staff and advisory board members have utilized Letters to the Editor in The Gazette, where opinions regarding service, pricing and reliability occasionally appear. Creative development for promotions and advertising of AZO has been enhanced by the introduction of a new logo, timed to give the marketing effort the same type of “new” feeling that was generated by the new terminal itself.

AZO was not in the market for a new logo, but Lam & Associates developed an option that gained instant approval, at the airport and in the community. The timing proved both intentional and ideal.

Prior to the opening of the new terminal, AZO “kept its powder dry” with messages aimed at holding the business community. Introduction of youth imagery in connection with the New Beginnings Campaign was largely subliminal in its starting over look.

2012-2013 MARKETING, PUBLIC RELATIONS AND COMMUNICATIONS PLAN / AUGUST 2011 / PAGE 5 

# Upgrade! 

# Message Development/Content/Creative

# Dallas and American-specific Message Development/Content

Marketing destinations for an airport is an excellent strategy in that it paints a picture that has a “window to the world” feel. The ability to promote Dallas/Ft. Worth should present tremendous creative opportunities that can surround the business-relationship work promoting the route and the uptick of traffic at the airport. Working with consultants (Mead & Hunt) and business partners, AZO has established a comfort level that Dallas/Ft. Worth and American are the best choices to develop the new route from a marketing and sales perspective.

Southwest Michigan First, Discover Kalamazoo (CVB) and the Kalamazoo Regional Chamber of Commerce have excellent connections with the business community in Kalamazoo County.

Links with Battle Creek Unlimited, the Battle Creek Area Chamber of Commerce, the Battle Creek CVB, Kellogg and other regional business sources are also well established. Southwest Michigan First, for instance, has communications mechanisms with some 100 businesses in the region, some of which are not included in the Chamber’s Kalamazoo Regional membership. Southwest Michigan First is an economic development force, recognized for leadership and success throughout the Midwest. AZO plans to take a collaborative approach with grantors, Dallas Ft. Worth, American and others to refine specific messages, with a strong emphasis on the launch of a new service, lest opportunities be missed.

A Dallas route significantly opens much-needed avenues to the West, the Southwest, Mexico and South America, and is a strong market for Battle Creek and Kalamazoo in its own right, according to research here. As noted above, the route also highlights greater diversity, frequency and distance of destinations, part of the “momentum” factor that fits so well into the plan to create momentum as part of a regional
revitalization.

2012-2013 MARKETING, PUBLIC RELATIONS AND COMMUNICATIONS PLAN / AUGUST 2011 / PAGE 6

# Budget

A $240,000 budget to market this initiative, over and above the visibility associated with regular marketing, advertising and public relations efforts allows suitable impact in this media market. Radio and print sources have offered the equivalent of $30,000 in in-kind and leveraged advertising and communications, and the following table highlights a balanced spending plan in which the new offering should feel inescapable.



# Marketing Resources

A marketing-attuned staff and aeronautics board, in concert with advisory committees and key partners serve as excellent decision makers for marketing this
initiative.

AZO utilizes the services of Lam & Associates, a unique resource in Kalamazoo, specializing in community relations and marketing. Lam & Associates, in business for 24 years, has business, client, professional and personal relationships with virtually every stakeholder in the area.

The principals -- Blaine and Bobbie Lam -- have been involved in volunteer and professional capacities with business organizations, foundations, nonprofits, governments and civic leaders at every level. Blaine Lam has served on an interim basis as chief administrative officer of eight different organizations, including the Kalamazoo Regional Chamber of Commerce, the Convention & Visitors Bureau (leading its reorganization) and the Arts Council of Grater Kalamazoo.

Lam has been and is involved in economic development, education and downtown development and was involved in the airport’s governance transfer to the County of Kalamazoo. With two designers on staff and the ability to work collaboratively with other organizations, Lam & Associates makes marketing the airport a top priority.

2012-2013 MARKETING COMMUNICATION / AUGUST 2011 / PAGE 7 

### Media Outlet **Year 1 Year 2**  **Total**



## Television $30,000 $5,000 $35,000 Lay & Business Print $30,000 $7,500 $37,500 Print In-Kind/Leveraged $10,000 $2,500 $12,500 Outdoor Advertising $30,000 $7,500 $37,500 Outdoor In-Kind/Leveraged $5,000 $2,500 $7,500

Radio $10,000 $5,000 $15,000 Radio In-Kind/Leveraged $2,500 $2,500 $5,000
Social Media/Web $10,000 $5,000 $15,000 Web In-Kind/Leveraged $2,500 $2,500 $5,000

Direct Mail $15,000 $7,500 $22,500 Trade Show & Marketing $5,000 $2,500 $7,500
Creative/Production Costs $30,000 $10,000 $40,000

Total $180,000 $60,000 $240,000Proposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Appendix B. Community Support** 

### 33



# Appendix B

**. C**  **ommunity Support** 

ppendix B includes letters of support for the AZO application to the US

DOT for improve d air service to high demand markets in the Southern
part of the US, Mexico, Central and South America

. Support letters were
submitted by participants in the public

- private partn ership and members

of the Kalamazoo/Battle Creek communities

. The letters of support are included
on the following pages of this Appendix B and are listed below.



### Government

United States Senate

– Senator Carl Levin

United States Senate

– Senator Debbie St abenow
Congress of the United States

– Congressman Fred Upton
Kalamazoo County Aeronautics Board of Trustees
Kalamazoo County Board of Commissioners



### Public

- P rivate Partners

Kalamazoo County/AZO (see cover letter)
Kalamazoo County Convention & Visitors Bur eau (Discover Kalamazoo)
Southwest Michigan First



### Local Businesses

Bronson Healthcare Group

Forum Communications Inc.

Kalamazoo Gazette
Kalamazoo Regional Chamber of Commerce
Midwest Communications, Inc.
Perrigo Company
PNC Financial Services Group
Stryker Corporation 

# A This section contains:
Letters of support from
members of the public

private partnership, the
local business community
and state government.

# MIDWEST COMMUNICATIONS, INC.

and Affiliates

26 July, 2011

The Honorable Raymond H. LaHood Secretary U.S. Department of Transportation 1200 New Jersey Avenue SE. Washington, DC 20590

Dear Secretary LaHood:

I am pleased on behalf of Midwest Communications, Inc WKZO, WNWN, WQLR, WTVB, and WVFM) to announce our commitment to the Small Community Air Service Development Program. We strongly support the additional service proposal put forth by the Kalamazoo / Battle Creek International Airport.

The Kalamazoo / Battle Creek International airport is vital to the continued economic development of not only the greater Kalamazoo / Calhoun county area, but also Southwest Michigan.

Midwest Communications, Inc. will provide in-kind advertising and marketing support to promote the airport’s proposal. This spot advertising program would air on WKZO, WVFM and WQLR in Kalamazoo. The total value of this in-kind support is valued at $10,000.

Additionally, our radio stations will share news and information as requested in both our news programs and in long form interviews. We will work to ensure our entire community understands the important impact this grant proposal will have on the greater Kalamazoo, Battle Creek area.

Thank you for your consideration and your support of southwest Michigan.



## Sincerely,

Peter F. Tanz, CRMC / CDMC 

## Vice President – Michigan Region Midwest Communications, Inc.

___________________________________________________________________________________ Peter F. Tanz, CRMC / CDMC 

## , Vice President – Michigan Region 269 . 350 . 3590

4200 West Main Street . Kalamazoo, Mich igan 49006 peter.tanz@wkzo.comProposal under the Small Community Air Service Development Program Kalamazoo/Battle Creek International Airport**Appendix C. Detailed Market Analysis** 

### 50



# Appendix C

**. Detailed**  **Market Analysis**

onfidential submission of the County of Kalamazoo

. 

# C This section contains:

An in

- depth analysis
evidencing familiarity with

the Dallas

- Fort Worth

market and ultimate
success of the proposed
Strategic Plan.