Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 APPLICATION UNDER
SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

DOCKET DOT

- OST

- 2013

- 0120

SUMMARY INFORMATION

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

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

. Legal Sponsor Name: Tri

- Cities Airport
DUNS Number: 04

- 583

- 4921 EIN/Tax ID:
91

- 600100222

B. L IST THE N AME OF THE COMMUNITY OR CONSORTIUM OF COMMUN ITIES APPLYING : 1._ T RI

- C ITIES A IRPORT , P ASCO , W ASHINGTON

_

C. P ROVIDE THE FULL AIRP ORT NAME AND 3

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

PROVIDE CODES FOR TH E AIRPORT ( S ) THAT ARE ACTUALLY SE EKING SERVICE ).
1. Tri

- Cities Airport (PSC)Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013

D. L IST THE 2

- DIGIT CONGRESSIONAL DISTRICT CODE APPLIC ABLE TO THE SPONSORI NG ORGANIZATION , AND IF A

CONSORTIUM , TO EACH PARTICIPATIN G COMMUNITY

. 1. WA

- 04

E. A PPLICANT I NFORMATION : (C HECK A LL T HAT A PPLY )
Not a Consortium Interstate Consortium Intrastate Consortium Community now receives subsidized Essential Air Service Community (or Consortium member) previously received a Small Community Air Service Development Program Grant
If previous recipient: Year of grant(s): 2003; Did not execute contract with DOT

F. P UBLIC /P RIVATE P ARTNERSHIPS : (L IST O RGANIZATION NAMES )
PUBLIC PRIVATE
1. Tri

- Cities Airport 1. TRIDEC
2

. Port of Pasco 2. Tri

- City Regional Chamber of Commerce

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

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

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

### XProposal of Tri

- Cities Airport • Pasco, Washington • July 2013

I. P ROJECT C OST : D O NOT ENTER TEXT IN SHADED AREA
L INE D ESCRIPTION S UB T OTAL T OTAL A MOUNT
1 Federal amount requested $7 00,000
2 State cash financial contribution $0
Local cash financial contribution
3a Airport cash funds $2 2 ,000
3b Non

- airport cash funds $48 ,000
3 Total local cash funds ( 3a + 3b ) $7 0,000
4 TOTAL CASH FUNDING ( 1+2+3 ) $77 0,000
In

- Kind contribution
5a Airport In

- Kind contribution** Various
5b Other In

- Kind contribution** Various
5 TOTAL IN

- KIND CONTRIBUTION ( 5a + 5b ) Various
6 TOTAL PROJECT COST ( 4+5 ) $77 0,000

J. IN

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

- Kind contribution) and 5b (Other In

- Kind contribution), please describe the source(s) of fund(s) and the value ($) of each.
L ocal media companies will offer discounts on advertising; partner airlines will offer free tickets for giveaways, etc.Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013

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

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

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

L. I S T HE A PPLICANT D ELINQUENT O N A NY F EDERAL D EBT ? (I F “Y ES ”, P ROVIDE E XPLANATION )
No Yes (explain)

_____________________________________________________________________________________________Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 1

TABLE OF CONTENTS

Legal Sponsor 1
Introduction 2
The Tri

- Cities Air Service Market 3
Current and Historical Service 3 Capacity Reductions 8
Air Service Needs and Deficiencies 9
Airfares in Pacific Northwest Markets 9
Load Factor Trend 10 Per Capita Capacity 11
Economic Trends 12 Air Service Development Plan : Tri

- Cities

– Los Angeles 13
Potential Performance of Service 16 Public/ Private Partnership 19
Conclusion 20



## LEGAL SPONSOR

The Tri

- Cities Airport is the legal sponsor responsible for administering the proposed air service development program. The Airport is a government agency, operated by the Port of Pasco.

Tri

- Cities Airport 3601 North 20 th Avenue Pasco, Washington 99301 Ron Foraker
, Airport Director (509) 547

- 6352 rforaker@portofpasco.org 

### Section Page NumberProposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 2

INTRODUCTION

The Tri

- Cities Airport is seeking a federal Small Community Air Service Development (SCASD) Grant for a revenue guarantee for the first time. While the Airport has been tremendously active in air service development over the last decade, recruiting new air service on five new routes, it has accomplished its air service goals without seeking federal aid. At the same time, the air

se rvice climate has changed dramatically, with carriers now avoiding routes without risk sharing in place. The Airport now finds itself in an environment where additional air service development will be either difficult, or impossible, without the help of a SCASD Grant.

The Airport serves a large area in eastern Washington, northwest Oregon, and western Idaho that is home to more than one million people. It has seen its network airline seats cut by 21% in the last three years, causing fares to jump to an average of $209 each way

– which ranks as the second highest average fare in the Pacific Northwest. Despite those challenges, the Airport has been able to grow its passengers by 40% in the last five years, reporting a new record for passengers in 2012 with more than 650, 000 traveling through its gates.

Tri

- Cities Airport benefits from non

- stop service to six of its top seven destinations as of August 2013. The lone exception is the Los Angeles Basin. Allegiant previous ly operated service between the Tri

- Cities and LAX, but pulled it in August of last year, despite an average 2012 load factor of 94%. The Tri

- Cities generated an average of 97 passengers per day each way to and from Los Angeles area airports

– and now those passengers will be forced to connect to access t he LA Basin.

The Airport is seeking $700,000 in federal assistance to provide a revenue guarantee to a network carrier to return Los Angeles service to the market. The Airport has put together a coalition of local support to help providing matching dollars for the project, and to provide broad outreach to ensure new service is immediately supported. Earlier this year the Airport met with both American Airlines and Alaska Airlines to begin the recruitment process. This Grant is the last piece of the puzzle to bringing Los Angeles network service to the Tri

- Cities. 

## “ The Airport... has seen its network airline seats cut by 21% in the last three years... causing fares to jump to... the second highest... in the Pacific Northwest.”Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 3

THE TRI

- CITIES AIR SERVICE MARKET Current and Historical Air Service

The Tri

- Cities Airport , serving the cities of Pasco, Kennewick, and Richland, is the main gateway for a huge area in eastern Washington State, northeastern Oregon, and parts of the panhandle of western Idaho. As the only airport in its region with service on more than one carrier, and the only airport with low cost airline service , the Airport has a large role in connecting dozens of cities to the national air transportation system.

The Airport’s catchment area, the area from which it draws passengers, extends from the Cascade Mountains in the west to the Idaho panhandle in the east. The area, seen in Map 1 in blue, is home to 1,036,438 people as of
the 2010 US Census. This population includes 800,000 people in Washington
Sta te, 176,000 people in Oregon, and 61,000 people in Idaho. The nearest competing airports are in Spokane, which is
almost three hours away by car, and Portland, which is almost five hours away by car. Due to the large number of people in the Airport’s catc hment area, a number of carriers have chosen to serve the Tri

- Cities Airport. As of July 2013, the Airport is served by Alaska Airlines, through its Horizon Air subsidiary; Delta Air Lines; United Airlines; and Allegiant Air. Altogether, Tri

- Cities Airpo rt has non

- stop service to eight cities (see Map 2). 

### MAP 1: Tri

- Cities Airport Catchment Area Source: Sixel Consulting Group, 2010 US Census EstimatesProposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 4 As of August of 2013, carriers serving Tri

- Cities Airport will offer 6% fewer
seats than they offered at the same time last year (see Figure 1). Allegiant’s available seats are down 50%, with the cancellation of non

- stop service to Los Angeles. The Tri

- Cities market was one of the victims of the cuts sparked by Allegiant’s loss of gate
space in Terminal Six at LAX. Alaska Airlines renovated much of the terminal, taking over new gates, and forcing Allegiant to share a gate in Terminal Three. This caused Allegiant to cut service to eight cities from its LAX gateway.

Of all Tri

- Cities carriers, only United will offer more seats in August of 2013 than it did in August of 2012 (see Figure 1). While United’s San Franc isco route sees steady capacity, United has added a weekend flight
on the Denver route. Meanwhile, Alaska and
Delta have both cut capacity in Tri

- Cities slightly from 2012 available seats. 

### FIGURE 1 : Scheduled Ser vice at Tri

- Cities Airport, 8/12 vs. 8/13 Source: Sixel Consulting Group; OAG Schedule Data, July 2013 MAP 2 : Current Service at Tri

- Cities Airport Source: Sixel Consulting Group; OAG Schedule Data, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 5 The result of these capacity shifts is that Alaska and Delta each offer about a third of Tri

- Cities available seats as of August 2013 (see Figure 2). Allegiant, which last summer offered 20% of Tri

- Cities available capacity, will offer just 11% of available seats i n August of 2013. United has held steady with about 20% of Tri

- Cities available airline seats.

Airline capacity at the Tri

- Cities Airport has increased dramatically in the last decade, as have origin and destination passengers. Since 2008, Tri

- Cities passengers have increased by 40% or an average of 254 additional passengers per day each way (PDEW) (see Figure 3). Much of this growth can be attributed to Allegiant, which began service in the market in 2007.



### FIGURE 3 : O&D Passengers and Average One Way Fares, Tri

- Cities Airport Source: US DOT OD1A, Calendar Year 2004

– Calendar Year 2012 FIGURE 2 : Seat Capacity Share by Carrier, Tri

- Cities Airport So urce: Sixel Consulting Group; OAG Schedule Data, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 6

While Tri

- Cities average fares have come down from their mid

- decade peak, they have been slowly rising over the last three years. Even with Allegiant data included in the overall average fare data, the 2012 one way fare at the Tri

- Cities Airport was $209, up 7%, or an average of $13 each way, from 2010 (see Figure 3 on previous page ). When Allegiant data is removed from the sample, the average Tri

Cities one way fare jumps to $219, 5% higher than the fare including Allegiant
passengers.

Allegiant’s impact is also seen in the list of the Tri

- Cities’ top origin and destination passenger markets. The three markets to which Allegiant has provided non

- stop service, Las Vegas, Phoenix/Mesa, and Los Angeles, all rank in the top four largest markets for 2012 (see Figure 4). The Tri

Cities Airport generated an average of 77.5 PDEW to and from Las Vegas in 2012, 51.3 PDEW to and from Phoenix/Mesa, and 39.1 PDEW to and from Los Angeles International Airport.

While Allegiant’s service at Tri

- Cities Airport provides the region with a low cost alternative for leisure travel, the core of the Tri

- Cities market is driven by eastern Washington and northwest Oregon businesses. Large nuclear research and engineering companies such as Areva, Battelle, Bechtel, Energy Northwest, URS, and CH2M Hill generate more than one hundred
passe ngers per day each way, primarily on network carriers. 

### FIGURE 4: Top 25 O&D Passenger Markets at Tri

- Cities Airport Source: US DOT OD1A, Calendar Year 2012Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 7

Allegiant’s presence, as noted, brings down the overall average fare in the Tri

- Cities market, but network carriers rarely match Allegiant on price. The result is high fares on all other carriers, ev en in markets where they directly compete with Allegiant. If you travel for business, and must travel on specific days of the week, or at specific times, Allegiant is rarely an option. The Tri

- Cities’ Business travelers subsequently pay much more for access to the national air transportation system than the average fares would illustrate.

The overall average fares in Allegiant markets run 25% lower than the overall average fares in non

- Allegiant markets. In an extreme example, the average one way fare to and from Las Ve gas, in 2012, was $92 (see Figure 5). Meanwhile, the average fare in Denver, which is a market served non

- stop by United, was $214 each way, despite the fact that both cities are roughly the same distance from the Tri

- Cities. Again, the Tri

- Cities overal l non

- Allegiant average one way fare, not including taxes and fees, was $219 in 2012, versus the fare including Allegiant, which was $209. The overall average fare of $209 each way still ranks as the second highest average fare in Pacific
Northwest market s, where the overall average fare was $177 in 2012. 

### FIGURE 5: Average One Way Fares at Top 25 Markets at PSC Source: US DOT OD1A, Calendar Year 2012

FIGURE 6 : Passengers and Seats per Day Each Way, and Load Factor at Tri

- Cities Airport Source: US DOT T100; January 2010

– March 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 8

Despite some of the highest fares in the West , passengers in the Tri

- Cities provide the Airport with some of the region’s highest load factors

– or percentage of seats filled. As of the 12 months
ended March 2013, the Tri

- Cities ma rket had filled an average of 83 % of its available seats (see Figure 6 on previous page ). Load factors in the market peaked in November of 2012, at 87.7% for that month.

During the 12 months ended March 2013
, Allegiant averaged a 93% load factor, which certainly helped to boost the overall Tri

- Cities numbers. Still, network carriers at Tri

- Cities Airport, including Alaska, Delta, and United, averaged a load factor of 77% over the same period, which is among
t he highest network carrier load factors in the Northwest. November and December of 2012 were especially strong for the Tri

- Cities’ network carriers, as they averaged load factors of 85.8% and 86.4%, respectively (see Figure 7).

Also of note is the fact t hat network carrier capacity in the Tri

- Cities has been cut by 21% since the summer of 2011 (see Figure 7). Since June of 2011, network carriers have cut available seats at the Tri

- Cities Airport by an average of 224 per day each way.

The market’s high l oad factors, coupled with high average fares, indicate the ability of the market to profitably support its air service. It also illustrates the ability of the market to support additional air service. There will be a gap in non

- stop connectivity with the loss of Los Angeles service on Allegiant, and that gap would likely be best filled by a network carrier offering daily flights. 

### FIGURE 7 : Passengers and Seats per Day Each Way, and Load Factor on Network Carriers at Tri

- Cities Airport Source: US DOT T100; June 2011

– March 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 9

AIR SERVICE NEEDS AND DEFICIENCIES IN THE TRI

- CITIES

The Tri

- Cities boast the fastest growing economy in the Pacific Northwest, some of the highest airline load factors in the region, and some of the highest average fares. The Tri

- Cities has seen capacity cuts in the last two years that have made it one of the more underserved markets in the country. All of the major indicators show that the market is primed for additional air service.

An analysis of average one way fares in Pacific Northwest markets shows the Tri

C ities has the second highest average fare in the region as of 2012. The one way average in the Tri

- Cities is $209, which is 18%, or an average of $32 each way, higher than the regional average fare (see Figure 8). Only Sun Valley,
Idaho
, had a higher ave rage fare in 2012 than the Tri

- Cities.

As previously noted, when Allegiant passengers are removed from the Tri

Cities analysis, the average fare jumps to $219 each way. The market’s non

Allegiant fare would be the highest average network carrier fare in the Pacific Northwest in 2012. However, it’s interesting that the high fares in the Tri

Cities do not appear to be suppressing traffic, as the market generated an all

- time record number of passengers, with an average of 895 passengers per day each way (PD EW) in 2012.

If Tri

- Cities passengers were being suppressed, or forced to access service in other markets, one would expect load factors at Tri

- Cities Airport to decline. The opposite has been true over the last three years. In fact, Tri

- Cities Airport had the third highest average load factor of all Pacific 

### FIGURE 8 : Average One Way Fare in Pacific Northwest Markets Source: US DOT OD1A, Calendar Year 2012Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 10

Northwest regional markets in 2012, at 82.7% of seats filled (see Figure 9). Only Eugene and
Med ford had higher load factors in 2012.
Tri

- Cities Airport outperformed a couple of airports with significantly larger catchment

areas

– Boise and Spokane.

Of similarly sized markets in the Northwest, Tri

- Cities Airport is one of the most underserved in terms of available airline seats. An analysis of Northwest markets with at least 200,000 annual airline seats shows the Tri

- Cities is
th e second most underserved, with an average of just 3.12 airline seats per capita (see Figure 10). Eugene had fewer seats per capita in 2012, but in 2013 it has added both Frontier Airlines service to Denver and American Eagle service to Los Angeles. In
2 013 it is highly likely the Tri

- Cities will be left as the most underserved market in the Pacific Northwest. In 2012, the Tri

- Cities had just 40% the available seats of the average Northwest market.

Subsequently, the Tri

- Cities market generates the secon d lowest number of passengers per capita in the Northwest, at an average of just 2.45 passengers in 2012 (see Figure 11 on next
page ). Tri

- Cities Airport sees just 38% of the average number of passengers per capita in the 

### FIGURE 10 : Seats per Capita in Pacific Northwest Markets Sources: US DOT T100, Calendar Year 2012; 2011 US Census FIGURE 9 : Pacific Northwest Markets Ranked by Load Factor Source: US DOT T100, Calendar Year 2012Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 11

region. Again, Eugene ranks below the Tri

- Cities in this analysis, but Eugene’s number will improve with recent service additions.

The Tri

- Cities boast the fastest growing economy in the Pacific Northwest, with a gross metropolitan product (GMP) of $10.7 billion in 2011, the most recent data available (see Figure 12). Since 2008, the Tri

- Cities economy has grown by 16.3%. No other Northwest market comes clo se in terms of economy advancement in that period. Airports with significantly more air service than the Tri

- Cities, such as Boise, Spokane, Eugene, and Anchorage, all saw much slower economic growth.



### FIGURE 12 : Gross Metropolitan Product of Pacific No rthwest MSAs Source: US Council of Mayors, March 2013 FIGURE 11 : Passengers per Capita in Pacific Northwest Markets Sources: US DOT T100, Calendar Year 2012; 2011 US CensusProposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 12

At the same time, personal income is increasing. US Census projections for 2015 shows 9.4% of all households in the Tri

- Cities metropolitan statistical area (MSA) will have incomes above $150,000 per year (see Figure 13). Another 16.4% of households will have incomes between $100,000 and $149,999 per year. In all, 39% of Tri

- Cities households will ha ve incomes in excess of $75,000 per year by 2015. This indicates growth in high quality jobs in the region, and the growth in the number of people who will be able to afford to travel.

With the economy of the Tri

- Cities area booming, it stands to reason the market can support additional air service. Planes flying in and out of Tri

- Cities Airport are almost 83% full on average, at the second highest average fare in the Northwest. The service provided by the market’s airlines is being supported. It is no w up to the Airport to bring additional air service to the region to help support its continued economic growth. 

### FIGURE 13 : Share of Tri

- Cities MSA Household by Income Level Source: US Census, March 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 13

AIR SERVICE DEVELOPMENT PLAN : TRI

- CITIES

– LOS ANGELES

It is clear the Tri

- Cities market can currently support additional service. It is also clear that Allegiant’s previous non

- stop service on the Tri

- Cities

– Los Angeles (LAX) route helped to stimulate the market to a level where it can support daily networ k carrier service.

So far in 2013, the Airport has met, in person, with planners from two prospective network carriers that could serve the route: American Airlines and Alaska Airlines. Planners from both airlines expressed the need for the community t o share the risk on the route, mainly due to its stage length

– 739 nautical miles

– and potential regional jet fuel burn over that stage length. The funding plan contained in this application constitutes the risk sharing necessary for the service to begi n.

Since Allegiant entered the Tri

- Cities

– Los Angeles market, passengers to all Los Angeles Basin airports (LAX, Burbank, Long Beach, Ontario, and Santa Ana/Orange County) have increased by 130%. In 2009, before Allegiant served the market, the Tri

- Cities generated an average of 42 passengers per day each way to and from the LA Basin (see Figure 14).



### FIGURE 14 : O&D Passengers and Average One Way Fares, Tri

- Cities

– LA Basin Airports Source: US DOT OD1A, CY2004

– CY2012; Includes LAX, BUR, LGB, ONT, and SNAProposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 14

The market peaked in 2011, with an average of 99 PDEW, and it generated an average of 97 PDEW to all LA Basin airports in 2012. A little more than half of a ll passengers

– 56%

- chose to use LAX in 2012.

The Allegiant fare is designed to stimulate traffic. The average Allegiant fare between the Tri

Cities and Los An geles was just $67 each way in 2012, which was 51% lower than the network carrier average fare of $136 each way (see Figure 14 on previous page ). It must be noted, these fares do not include ancillary fees and taxes. Allegiant reports it earns in excess of $35 each way in ancillary revenue per passenger, meaning the effective PSC

- LAX one way fare is closer to $102 than $67.

Before Allegiant served PSC

LAX non

- stop, Tri

- Cities passengers preferred to use alternate airports within the LA Basin. In 2009, 61% of Tri

Cities

– Los Angeles Basin passengers used airports other than LAX. But
, as of 2012, that number dropped to 44% (see Figure 15). As fares to LAX fell with Allegiant’s presence, LAX became the preferred airport for 56% of the passengers. Santa Ana/Orange County ranked second in 2012, with a 21% passenger share in the Tri

- Cities market, while 14% of passengers used Ontario.

The data shows Allegiant’s discontinuation of Los Angeles service was not caused by the performance of the Tri

- Cities market. When the Tri

- Cities

– Los Angeles route was served in 2012 it averaged a load factor of 94% (see Figure 16). In f act, in its entire tenure, the route only had 

### FIGURE 15 : Tri

- Cities

– Los Angeles Market Detail Source: US DOT OD1A, Calendar Year 2012

FIGURE 16 : Passengers and Seats per Day Each Way, and Load Factor, PSC

- LAX on Allegiant Source: US DOT T100; June 2010

– August 2012Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 15

one month with a load factor below 85%. The route was likely a victim of Allegiant’s previously discussed gate shuffle at LAX and subsequent discontinuation of a number of LAX routes.

Network carrier service to Los Angeles would not only serve the origin and destination market, which current ly

generates sufficient traffic to fill at least a single daily 50

- seat regional jet, it
would also be able to connect the Tri

Cities to a number of new one

- stop destinations not served through
current hubs. When analyzing the connection package on American and Alaska (the connections are nearly identical due to the codeshare agreement between the two carriers), there are 51 one

- stop destinations that could be served over the LAX hub (see Map 3). The Tri

- Cities market currently generates an average of 426 p assengers per day each way (PDEW) to and from these connecting cities and Los Angeles, itself. The American and Alaska brands connect to more unique cities than any other carrier that could serve Los Angeles. United’s connection package at LAX is inferio r to the current connection package offered on the PSC

- SFO route. The same is true of Delta’s connecting package at the Salt Lake City hub.

Service on either American or Alaska between Tri

- Cities Airport and LAX would access an average of 97 PDEW to and from the Los Angeles Basin (see Figure 17 on next page ). It would also be able to access large traffic flows to cities in the Southwest , in Mexico, and in Hawaii. Los Angeles would be the preferred connecting point for Tri

- Cities passengers to cities suc h as 

### MAP 3 : Connections ove r LAX on American Airlines and/or Alaska Airlines Source: Sixel Consulting Group Hub Builder Software, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 16

Phoenix, which averages 26 PDEW; San Diego, which averages 18 PDEW; Guadalajara, which averages 15 PDEW; Honolulu, which averages six PDEW; Mexico City, which averages six PDEW; and Maui, which averages four
PDEW.

Average fares in many of the Tri

- Cities markets that could be served by American or Alaska over LAX are high

– they clearly reflect a general lack of competition between Tri

- Cities carriers. The overall average fare paid by passengers that could flow over LAX on Alaska or American, for 2012, was $183 each way (see Figure 18 on next
page ). That overall average includes passengers who current ly fly on Allegiant, an d it does not include any ancillary fees or taxes. When Allegiant passengers are removed from the equation, the average fare jumps to $202 each way which is

, again, one of the highest average fares in the Pacific Northwest. Service to and through Los Ang eles on American or Alaska would be targeting many current high fare markets, providing additional competition in the Tri

- Cities.

The Airport’s recruitment effort for network carrier service to Los Angeles began early in 2013. The Airport, and its local partners, traveled to meet with both Alaska Airlines and American Airlines in preparation for this application. They also studied other airports recent successful recruiting efforts for Los Angeles service, including the efforts of both Eugene and Bend/Re dmond, Oregon. These efforts helped determine the amount of both local and federal funding required for the project. 

### FIGURE 17 : Top 25 Markets over LAX on AA and/or AS , CY12 Source: Sixel Consulting Group Hub Builder Software, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 17 The total project cost is $770,000 (see Figure 19). The majority of that funding
, $700,000, will provide a revenue guarantee for the carrier operating the new
route. If the route sees immediate success, as would be suggested in the data included in this application, the revenue guarantee portion of the funding would not be used. In addition to the revenue guarante e, the Airport has earmarked $38 ,000 for marketing and advertising of the new service. This is a key to getting people onto the flights as soo n as they begin. The Airport will also set aside $10,000 to cover the carrier’s

s tart

- up expenses and another $22 ,000 for fee waivers, including landing fee discounts.

The anticipated timeline for the project assumes a Grant would be awarded in September of 2013 (see Figure 20 on next page ). If the Grant agreement with the DOT is finalized in October of
2013
, the Airport will step

- up its recruitment efforts in the fall, endeavoring to meet with the targeted airlines through the winter. In a best

- case scenario, the Airport would hope to target April of 2014 for a new service announcement, with creative materials ready for the marketing program shortly after a formal serv ice announcement. The targeted start date for service would be June of 2014, with a two

- year revenue guarantee period, allowing the Grant to be closed by September of 2016. 

### FIGURE 18 : Average One Way Fares in Top 25 Markets over LAX, CY12 Source: Sixel Consulting Group Hub Builder Software, July 2013

FIGURE 19 : Project Budget Source: Tri

- Cities Airport, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 18 It is possible the timeline could slip, based on economic factors, airline planning factors, and items outside the control of the Airport or prospective airlines. It is also possible prospective airlines could prefer to use the funding under this plan for an alternate route. As Tri

- Cities Airport has never received a Small Community Air Service Development Grant for a revenue guarantee , it should not be limited in alternate uses. Among alternate routes the Grant could be used for would be Phoenix on a ne twork carrier, San Jose, Sacramento, San Diego, Dallas/Ft. Worth, or any other route that would provide new connectivity for the market. 

### FIGURE 20 : Project Timeline Source: Tri

- Cities Airport, July 2013Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 19

PUBLIC/PRIVATE PARTNERSHIP

This application for federal Small Community Air Service Development Grant funding is supported by a group of community partners which have pledged their support for the effort to bring network service to the Tri

- Cities

– Los Angeles route . These partners include a local economic development organization, a chamber of commerce, and the port that owns and operates Tri

- Cities Airport.



### TRIDEC

The Tri

- City Development Council , known as TRIDEC, handles all economic development activities in the Tri

- Cities region, which includes the cities of Pasco, Kennewick, and Richland. TRIDEC has been a long

- term Airport partner, sending its representatives with Airport leaders to airline headquarters meetings and conferences. TRIDEC shares in the expense of air servi ce development consulting work, and in the expense of advertising air service. TRIDEC is the main partner in this application for federal support.



### Port of Pasco

In Washington State, ports are often charged with owning and operating airports. The Port o f
Pasco operate s as an independent government agency , separate from any of the other government structures in the region. The Tri

- Cities Airport is one of the three main divisions within the Port of Pasco, the other two being marine and rail. The Port i s constantly working on economic development projects in the Tri

- Cities, and the Airport is at the center of that effort.



### Tri

- City Regional Chamber of Commerce

The Tri

- City Regional Chamber of Commerce is the leading business advocate for nearly 1,300 private, public and non

- profit member firms in the Tri

- Cities region. The fifth largest chamber in Washington, the Tri

- City Regional Chamber advocates for a strong business community

. The Chamber promote s regional prosperity and strengthen s its member bu sinesses through advocacy, leadership, networking and innovative business programs. Its businesses have expressed strong support and demand for additional air service.Proposal of Tri

- Cities Airport • Pasco, Washington • July 2013 

## 20

CONCLUSION

The Tri

- Cities Airport serves a catchment area of one million people, in the fastest growing regional economy in the Pacific Northwest. In the last four years, the Tri

- Cities economy has grown by 16%. Income levels have shot upwards, as well, with 39% of households projected to earn $75,000 or more by 2015.

At the same time, airlines

– especially network carriers

– continue to squeeze capacity at the Airport. Since the summer of 2011, network airline capacity at Tri

- Cities Airport has been cut by 21%. And this summer, Allegiant’s capacity is down 50% from where it was last summer, with the loss of non

- stop service to Los Angeles. The market is clearly underserved, averaging just 40% of the available airline seats per capita of its Pacific Northwest peers.

As seats have been pulled from the market, fares have continued to edge higher. Tri

- Cities Airport now has the second highest average fare in Pacific Northwest regional marke ts. If you exclude the Airport’s Allegiant passengers from the equation, the fares in the Tri

- Cities become the highest of all Pacific Northwest airports, at $219 each way on average.

Despite high fares and less capacity, the Airport has been able to gro w passengers

– setting a new record in 2012. But this trend will be unsustainable without additional service. The number one target for service is, far and away, Los Angeles

– a market that generated an average of 97 local passengers per day each way in 2012. The Airport has started discussions with both American Airlines and Alaska Airlines regarding Los Angeles (LAX) non

- stops. Both carriers have indicated a need for risk sharing to effect a route
launch.

The Tri

- Cities Airport has never before appli ed for a Small Community Air Service Development (SCASD) Grant to be used for a revenue guarantee . It has been able to recruit five new routes over the last decade without federal support. But the Airport realizes the environment has changed, and in orde r to be competitive with other non

- hub airports it must offer risk sharing on targeted routes. This SCASD Grant application is the key to additional service in the Northwest’s fastest growing market. 

## “ ...the Airport has been able to
grow passengers

– setting a new

re cord in 2012. But this trend will be unsustainable without additional service.”