### BEFORE THE OFFICE OF THE SECRETARY

UNITED STATES DEPARTMENT OF TRANSPORTATION

Community Proposal Golden Triangle Regional Airport

DUNS # 075457010

SMALL COMMUNITY AIR SERVICE DOCKET OST

- 2010

- 0119

DEVELOPMENT PROGRAM

Congressional District # MS 1



### Statement of Problem

Golden Triangle Regional Airport serves a wide region of Mississippi, including Columbus, Starkville, and West Point, comprising a po pulation area in excess of 100,000

.

Over the past five years, the region has experienced v ery strong economic growth, with new plants, industries, and investment from companies in the US as well as global manufacturers.

These include a state

- of

- the

- art steel mill owned primarily by Russian interests, a helicopter manufacturer based throughout T he E.U., a Dutch truck manufacturer with interests in the E.U.

as well as in the Dallas

- F t .Worth Metroplex and Seattle, not to mention a range of defense

related industries.

This influx of industry has come to the region in the last five years. Unfortunat ely, that same period is one where the airline industry serving the area has severely contracted. Today, GTR

has a strong and growing need for additional air service access not only to points in North America, but also to industrial centers across the worl d.

This is the challenge which represents a growing and economically

- threatening air service deficiency . Because of cutbacks in fleets and changes in airline strategies, GTR today is connected to the globe via a very thin and tenuous three flights per da y to Atlanta. This makes access to and from the US west a very time

- consuming back

- track process. It also leaves the region with only one airline system

– Delta.

GTR and the region it serves today require additional air service access to satisfy, support, and maintain the economic growth that this region of Mississippi has experienced. To that end, the Airport and community are requesting a grant in the amount of $ 8 00,000, to be matched 20% with local dollars, to recruit either American Airlines service to its DFW hub, or United to its Houston Intercontinental hub. Either one can provide the westbound access the region requires.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 2

2 011 and beyond: A Debilitating Air Service Deficiency

Given the economic development in the GTR region, the need for westb ound connectivity is of

the utmost importance to the local companies , as well as fare conscious leisure travelers in the

area . As previously stated, the growth in industrial development is one of the strongest in the southeastern US, and it truly does have a global reach.

While the Delta service to Atlanta has excellent connectivity to the east coast and Europe, the
recent loss of Delta’s GTR

- MEM route leaves a major deficiency in access to the west ern US

. This is even more debilitating today for the GTR economy in that several major new industries, including PACCAR (large truck manufacturer) and Eurocopter (helicopter manufacturer) have need of access to their facilities in Texas, the Northwest, and California.

Despite Strong Economic Growth, A Decline I n Air Service Continues

As illustrated in the graph below, departures /arrivals increased between 2008 and 2010, due to the installation of the MEM service, however, with its loss the YTD 2011 plus scheduled data

and projected 2012 departures /arrivals show s a precipitous drop off in capacity.

 Departures and arrivals in the GTR market are estimated to drop 28% between 2010 and 2011, and another 7% in 2012 versus 2011.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 3

 Average airfares in 2010 at GTR were 31 % and 41% higher than at the two ma in
alternat ive airports, Jackson and Birmingham. Moreover, the fares at GTR are increasing at a higher percentage and absolute dollar amount than the competing airports between

2009 and 2010.

 Passenger traffic and access to affordable airfare s are at serious risk de spite the strong growth in the local economy. The presence of one airline sys tem at GTR allows there to

be only one market maker for airfares, which is counterintuitive to the spirit of competitive balance.

Proof of the effects of these changes in service can be found in average fares compared to other airport to which GTR consumers have reasonable access.

Whi le fares have only increased approximately $15 at JAN and BHM, GTR has seen a full $30

increase in what consumers are paying

. The major reason f or this is the lack of competitive air

service

. 1 Another reason is that because air service to the West requires nearly an additional

500 miles of back

- tracking to Atlanta (240 miles each way), the fare levels can be expected to be high at GTR.

This curre nt grant application is intended to alleviate both the lack of adequate air service access, and provide fare discipline to the market as well. gain access to the DFW hub of

American or the IAH hub of United , which will provide needed new competition, rever se the capacity decline, provide some additional fare discipline, and allow for much needed access to

the western US

.

The refore, Golden Triangle Regional Airport Authority hereby respectfully submit s this application for a grant under the Small Community Air Service Development Program.

1 Average fares paid in CY 2009 v CY 2010 . Source: Aviation DataMiner analys is of US DOT data.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 4

This Grant Is Designed To Provide Immediate Results

The grant requested will successfully accomplish the following:

 Resolve A Clear Air Service Deficiency

. The grant herein will allow GTR to recruit

service to a m ajor westbound air service gateway. Specifically, the aim is either the

American Airlines hub at DFW or the United Airlines hub at Houston Intercontinental. There are organizational issues currently at each carrier. American is in the process of shifting i ts fleet mix and changing its relationships with regional partners. United is still in the merger process with Continental. As a result, while both carriers have expressed interest in GTR, it will not be until the fourth quarter of 2011 that hard negotiati ons with the carriers can begin.

 Engender New Investment

. GTR is the site of substantial investment by companies such as Eurocopter, with large facilities in Texas. Expansion of their GTR facilities will be dependent on air service access to the West, wit hout the necessity of a three

- hour (at minimum) back

- track over Atlanta.

PACCAR , a major manufacturer of large trucks (such as Kenworth and Peterbilt), has major facilities in both Texas and the Northwestern US.

Additionally, Senator Cochran has announc ed the launch of the GTR Global Aerospace Park, a 3,000 acre property next to GTR with construction

- ready land for aerospace

related industry development.

The Golden Triangle community has worked tirelessly to attract and retain business partners

over th e last several years. These businesses provide a boon to the local economy, offering good paying jobs and benefits for the local residents.

The air service that this grant will engender will allow these companies, and by extension the local citizens, som e reassurance that their decisions to establish a presence in the GTR region
was the correct one

.

Need For Grant Support

The Department is well aware of the current difficult situation in the airline industry. Carriers today seek to avoid risk, and that includes situations that involve initiation of new service, even in markets where the traffic demand is high and the potential for success great. Today, in light of the enormous financial challenges facing the airline industry, some form of economic risk

r eduction must be in place to attract new service such as that which is proposed in this document. Preliminary discussions with the carrier s have made clear that such would be necessary to attract this service.

Golden Triangle Regional Airport Authority is applying for a grant in the amount of $ 8 00,000,
and there will be a local match of $200,000, resulting i n a total program funding of $ 1,000.000.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 5

The Risk

- Abatement Program

The Airport and Community plan to apply $950,000 of the total program funds to ward a c learly

defined and agreed

- upon revenue guarantee program for the first year of the proposed service.

The remaining $50,000 will be in the form of a well

- targeted marketing program within the GTR air service region. It is noted that westbound acce ss is not service that needs to be strongly promoted

– the local industries currently have strong demand for efficient westbound access, and the new service will see rapid traffic build.

The revenue guarantee will be drawn upon only if reasonable, pre

- det ermined traffic and revenue generation goals are not met. At the end of the 12

- month period year, and any DOT

revenue

- guarantee funds not used will be relinquished to the Department.

The community believes that this request fills both the intent and the s pirit of Congres s in implementing this program. The community has a pressing air service deficiency that drives fares higher than competing airports, and is threatening to slow the strong economic growth in

the Golden Triangle region.

The unique communit y enthusiasm for business development that will support this new service is showcased by the growing investment in the region by diverse manufacturing companies such as Severstal Steel, Weyerhaeuser Corporation Printing Paper, American Eurocopter, PACCAR, and Baldor Electric Company. These companies, and ones like them, have many options as to where to establish facilities. The fact that they did so in the Golden Triangle region speaks volumes about their vision for the future in the area, and increased air service would certainly reinforce those expectations.

Grant Administration

This application is submitted by the Golden Triangle Regional Airport Authority and will be the organization responsible for the administration of the grant funds. The community support for this application is broad and encompasses the entire business base of the region.

The unique community enthusiasm for business development that will support this new service is showcased by the growing investment in the region by diverse manu facturing companies

such as Severstal Steel, Weyerhaeuser Corporation Printing Paper, American Eurocopter, PACCAR, and Baldor Electric Company These companies, and ones like them, have many options as to where to establish facilities. The fact that they di d so in the Golden Triangle region speaks volumes about their vision for the future in the area, and increased air service would certainly reinforce those expectations.

Project Sponsor s & Community Partner

The official sponsor of this project is the Gold en Triangle Regional Airport Authority.

The community partnership will be directed by the Columbus

- Lowndes Community Development

LINKUS DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 6

The community and the Airport appreciate the time and efforts of the Department in reviewing this application, and look f orward to a favorable decision. Please direct any correspondence regarding this matter to :

Mr. Michael P. Hainsey

Executive Director Golden Triangle Regional Airport 2080 Airport Road Columbus, Mississippi 39701

662

- 327

- 4422US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 7



# Contents of Proposal

I. Golden Triangle Air Service Review

........... 8

Golden Triangle: The Case for Westbound Service

................................ .. 9

Circuitous Routings = Higher Fares

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

Sizing The Traffic Loss

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

Past Air Service Development Activities

................................ ............... 12

Prior Grant Applications

................................ ................................ .... 12

The Grant Will Create Competitive Balance

................................ .......... 12



# II. Grant Administration Plan

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

General Application of Grant Funding

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

Carrier Negotiations & Agreement

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

Program Fund Allocation

................................ ................................ ... 15

M arketing & Advertising Support

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

Post

- Grant Support

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

# III. Summary of Application

........................ 17US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 8



## I. Golden Triangle Air Service Review

The Golden Triangle MSA alone has a population in excess of 10 0 ,000, but the general

catchment area of Golden Triangle Regional Airp ort comprises all or parts of 12 cou nties, with a

popu lation base of approximately 220 ,000 people.

Golden Triangle’s stature as a developing commercial and industrial center is strengthened by

its l ocation at the junction of two major Interstate highway arteries. From a n air service

perspec tive, however, these highways facilitate acces s to Jackson, Birmingham

, and even Memphis where lower fares and nonstop service to both DFW and IAH are in place. This grant

will su bstantially reduce that leakage and allow for more convenient service for the GTR market

area.

The western US business t ravel base at GTR is sensitive to th e fact that traveling through Atlanta to connect to points west is a major inconvenience and drain on valuable time. The

additional alternative access to the DFW or IAH hub will be a major upgrade to address this deficiency.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 9



### Golden Triangle: The Case for Westbound Service

The deficiency in service connecting GTR to the west has never been more serious. An

examination of GTR western traffic from 2010 shows that there is significant demand for air

service , but access has primarily been only via MEM, which is now being canceled

, or ATL, which is a very indirect routing for westbound traffic from GTR . Below are passenger traffic and revenue data for major western cities in 2 010.

GTR Today Is Only “Half Served”

Today, the need for US and global access for GTR is more critical than ever. The growth in the local economic and industrial base represents demand for service across the nation and to international points as well. Mu ch of the industrial growth has been with companies with roots

in the E.U. The current Delta service

– at a bare

- bones three daily flights

– addresses this need. However, the community is partially cut off from the nation west of the Mississippi by virtue of lack of access to a western airline hub gateway.

The result is that western access to and from GTR involves substantially more flying

– at least

six hours per round trip in additional travel time. 2

2 This is 1.2 hours to Atlanta, at least one hour for connect time, and retracing the miles west.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 10

For example, the flying travel distance today be tween GTR and DFW (where there is substantial

demand from PACCAR and Eurocopter, among others) is almost 50% more than a nonstop flight would be to American’s DFW hub. Access to Houston represents 60% more flying.



### Circuitous Routings = Higher Fares

Becau se of the air service deficiency at GTR, consumers suffer much higher airfares that at other airports in the region. A review of average fares paid at GTR v Jacksons and Birmingham for 2010 illustrates this point:

To key western destinations, particula rly some that have strong current or growing business ties with the GTR region, the variance in average fares paid by consumers is often astronomically higher than the averages shown above. Reviewing average one

- way fares paid in 2010, including taxes and federal fees, it is clear that the lack of direct access to the west is resulting in higher travel costs and depressed demand. 3

Note that two key destinations that have strong military

- related communities of interest with

Columbus Air Force Base

– Co lorado Springs and San Antonio

– have very wide fare disparity with Jackson. Overall, to these key destinations, consumers are paying over 80% more than at

Jackson.

The Airport and the community would respectfully submit that these data clearly demonstrat e the air service challenge that Golden Triangle Regional Airport is facing, particularly as it continues to compete for industrial investment in the area.

3 Average one

- way fares paid, including federal fees and taxes for full year 2010. Source: DB1B data analyzed by

Aviation DataMiner.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 11



### Sizing The Traffic Loss

To size the loss in traffic demand that this grant can help recapture, th e western passenger

O&D wa s compared for Jackson and GTR.

This was then related to the passengers

- to

- population for each airport:US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 12

Without question, GTR is not capturing the westbound traffic it is now generating. Service to DFW or IAH, as outlined in this application, will not only capture this traffic, but can also

stimulate new traffic demand.



### Past Air Service Development Activities

The airport and the community have worked very hard to retain existing service and recruit new

carriers to the ma rket. In the very tough environment of the past five years, it has been a very difficult challenge.

On a routine basis, the Airport has meetings with incumbent Delta, as well as with target new entrant carriers. As the Department is aware, however, the pu ll

- down of hubbing levels at STL, CVG, and most recently, MEM has resulted in much

- reduced opportunities to attract new

service.



### Prior Grant Applications

The Golden Triangle Regional Airport was awarded a grant in year 2007 which was for a risk

abatement program specifically to attract a second carrier to the airport. After gran t award, the Department allowed the grant to be used to underwrite additional incumbent Northwest/Delta

service.

This current application is different in goal and in intent. The influx of new businesses to the region in the pa st f ive years has created a pressing need for access to points in Texas and Seattle, as well as for points in the West



### The Grant Will Create Competitive Balance

Golden Triangle Regional Airport is now served by only one airline system, and onl y to one of that carrier’s connecting hubs. While the community is grateful for this air service, there is a greater need for the business community as well as the leisure travelers. The extensive economic growth and the expectation of future growth demand s enhanced connectivity to the west, and DFW or IAH support that connectivity

. Healthy competition among airline systems will help reduce fares, add greater route efficiency, and allow the consumer to make more than just one choice when going on a business trip or a vacation.

The Golden Triangle Regional Airport Authority would re spectfully submit that the Small Community Air Service Development Grant Program was designed to address this type of situation. It is further noted that the grant will result in materially

- improved air service, with minimal risk to the scarce funds allocated by Congress to this program.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 13



## II . Grant Administration Plan

General Application of Grant Funding

The grant requested in this application will be applied only to provide assurances regarding the levels of revenue the target airline will attain, based on reasonable, pre

- negotiated passenger projections.

Fundamentally, this is not a subsidy

– if the revenue targets are met, no funds will be due the carrier. The program will simply provide a safety net to offset the airline’s legitimate initial risks in opening a new nonstop market.

This approach has been used successfully at a number of other small airports with the assistance of SCASD program grants. It will also be succes sful at Golden Triangle Regional Airport.



### Carrier Negotiations & Agreement

Upon grant award, the Airport will initiate negotiations with either American or United. The Airport will propose the following, with the final agreement subject to Department ap proval:

 Provision for two daily (reduced week

- end) frequencies, timed to connect with the carrier’s flight banks at the connecting hub

– American at DFW or United at IAH ;

 A pre

- agreed per

- segment cost for the operation. This will include a fuel factor (e scalator and deflator) and will be based on historical published costs for E

- Jet, ERJ (or CRJ) aircraft. The cost will include a reasonable profit hurdle to be agreed upon.

 It is noted that there is considerable current and pent

- up demand for the access t hat the grant

- supported service will provide. Therefore, the risk

- offset will be for one year only.

 Reliability will be crucial to the success of the service. Therefore, strict schedule performance standards will be 98 % controllable flight completion, 95% on

- time (w/in 15

minut es of schedule) arrivals , based on airline

- controllable factors.

 The agreement will contain stipulations on reasonable pricing and availability of discount seat inventories on the flights. The A irport will require the airline to pro vide updates regarding pricing and availability on the route to assure that fares approximate those in similar markets operated by the airline.

 Airline operational and revenue performance will monitored monthly and reported to

DOT on a quarterly basis . Th e f inal accounting of any revenue suppor t will be made at

the end of the 12

- month period.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 14

 Determination of any risk

- offset dollars owed to the airline will be made at the end of the grant period, adjusted for any service failures. In no case will the carr ier be due more than the total of the revenue support portion of the program.

The Airport will not make any agreement without the Department’s review and approval . The Airport will provide the Department with a complete summary of the revenue support

agre ement that is consummated with the air carrier that will operate the route.

The Airport will provide the Department with a progress report on the revenue support program on a quarterly basis, or as the Department may otherwise specify.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 15



### Program Fund Allo cation

The program is intended primarily provide a revenue guarantee to reduce the carrier’s initial risk in entering and building the GTR market

. In addition, there will be a local marketing effort that will engender local awareness and support for the n ew service.

Support

– Negotiations & Related Activities

Promptly upon approval of this application, GTR staff will initiate negotiations with the target carrier systems.

These will include clear cost and revenue goals agreed

- upon in advance. The pr oposed flight schedule will be reviewed for connectivity. The Airport will have the option of cancelling the program with sufficient notice to the carrier should the traffic and revenue not build sufficiently during the 12

- month period.

Revenue Guarante e Component

The target carrier would be required to provide a minimum of two round

- trip flights daily, using

at minimum 44

- seat jets. 4 The program would establish strict standards, including a schedule completion requirement of 98%, ex

- weather.

The reve nue guarantee will be structured based on projected local traffic as well as a mechanism for credit for beyond

- hub revenues generated by the new service. With the agreement of the Department, GTR would propose a structure similar to that used successfully

at other airports that have built service with grant

- funded revenue off

- set . Minimum revenue goals will be established, and monitored monthly. Any variance would be computed at the end

of the grant period

.

4 This will accommodate the American Eagle fleet. Other AA entities have larger aircraft as well. United Express only has jets 50

- seats or larger. A reduced schedule on weekends would be acceptable, with a minimum of two round trips.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 16

Based upon the traffic projections completed by t he Airport, it is expected that the market will

attain self

- sufficiency in a reasonably quick period. The community would agree to relinquish any unused grant funds back to the Department after 1 2 months from start of service.



### Marketing & Advertising Supp ort

The Community intends to implement an aggressive targeted program of advertising and marketing to assure that the new service builds traffic quickly and with minimum draw on the
revenue guarantee. These will include:

 Pre

- Operations Support: It is cri tical that the community be made aware of the new service, but within a reasonable timeframe before it begins. As illustrated in the data herein, it is believed that the ramp period to economically

- viable bookings will be short, but the local print and ele ctronic media will be used to promote the service with a blitz

30

- day before the first flight

. 5

 Civic Contact: Community groups will be tapped to allow Airport staff to present the new service at key membership functions.

 Airport Events: In conjunction with the target carrier, events at Golden triangle Regional Airport will be planned to raise the profile of both the new service as well as the

incumbent Delta service to Atlanta



### Post

- Grant Support

Golden Triangle Regional Airport has an aggressive mar keting program focused on the new emerging industries establishing facilities in the region. Direct contact with travel departments at important businesses such as Eurocopter, P ACCAR , and others will assure that ridership remains strong after the 12

- month grant period. In addition, the Airport and community have resources to market the service within the region.

Because the majority of the passenger traffic is expected to be business

- driven, the Airport will continually work with the target airline to assu re that the carrier’s marketing is well

- focused on the key corporations that have facilities in this region of Mississippi.

5 Booking decisions are now made very close to travel date. A media blitz earlier than 30 days will not be fully effective

.US DOT Docket OST 2011

- 0119

_______________________________ Grant Application

– Golden Triangle Regional Airport Authori ty Small Community Air Service Development Program 17



## III

. Summary of Application

The Golden Triangle Regional Airport Authority believes that this application is consistent with

the goals of the Small Community Air Service Development Grant Program.

 It addresses a demonstrable air service deficiency

– lack of western connectivity
and high fares that are causing substantial leakage and lost economic impact

.

 It will reduce the relia nce on congested Atlanta Jackson

- Hartsfield as the only major gateway for Golden Triangle

.

 It will foster goodwill with the business community that the region has worked so hard to build up over the last several years

. The business community needs easy,

a ffordable access to the western US.

 It will help to b ring fare discipline to the GTR market. In 2010, consumers at

GTR actually paid on average 31 % more than consumers at nearby Jackson

, (to western destinations, as much as 80% more) resulting in signific ant leakage and lo st economic impact to the Golden Triangle region

.

Based on these data, the Airport would ask the department for favorable consideration to this application.