## Dun & Brad street DUNS Number : 106201270 Tax Identification Number: 62

- 6001466 Two

- Digit Congres sional District Code: 01 

# Tri

- Cities Regional Airport Blountville, Tennessee
Proposal u nder the Small Community Air Service Deve lopment Program

Docket DOT

- OST

- 2011

- 0119 

# TRITri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 2 

## TABLE OF CONTENTS
INTRODUCTORY LETTER

................................ ................................ ................................ .................... 4 EXECUTIVE SUMMARY

................................ ................................ ................................ ........................ 5 AIR SERVICE OVERVIEW

................................ ................................ ................................ ..................... 7 Catchment Area and Access to Alternate Airports

................................ ................................ ................................ . 7 Tri

- Cities' Existing Air Service

................................ ................................ ................................ ................................ 8 Air Service Development Efforts

................................ ................................ ................................ .......................... 10 Marketing and Promoti on of Tri

- Cities' Air Service

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

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES

................................ ............................. 12 Capacity Trends and Discontinued Air Service

................................ ................................ ................................ .... 12 Traffic Trends

................................ ................................ ................................ ................................ ....................... 14 Leakage to Other Airports in the Region

................................ ................................ ................................ .............. 16 Domestic Fare Trends

................................ ................................ ................................ ................................ .......... 17 Twentieth Highest Domestic Fare in the United S tates

................................ ................................ ....................... 18 International Traffic and Fare Trends

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

### STRATEGIC PLAN

................................ ................................ ................................ .............................. 20 Proposed New Route

................................ ................................ ................................ ................................ ........... 20 Goals

................................ ................................ ................................ ................................ ................................ .... 20 Target Airline Support

................................ ................................ ................................ ................................ .......... 21 Tri

- Cities

- Dallas/Ft. Worth Traffic and Fare Trends

................................ ................................ ............................. 21 C onnecting Traffic and Revenue on American via Dallas/Ft. Worth

................................ ................................ .... 23 American Eagle's Success in the Asheville

- Dallas/Ft. Worth Mark et

................................ ................................ .. 26 Grant Amendments/Alternate Strategies

................................ ................................ ................................ ............. 29 

### PROJECT IMPLEMENTATION, MONITORING AND FUNDING

................................ .......................... 30 Public / Private Partnerships

................................ ................................ ................................ ................................ 30 Project Funding

................................ ................................ ................................ ................................ .................... 30 Implementation Timeline

................................ ................................ ................................ ................................ ...... 31 

### PROJECT MONITORING AND FINANCIAL CONTROL

................................ ................................ ...... 32 Success Metrics

................................ ................................ ................................ ................................ ................... 32 Legal Sponsor

................................ ................................ ................................ ................................ ...................... 33 Financial Controls

................................ ................................ ................................ ................................ ................ 33 

### APPENDIX A: REQUIRED SUMMARY INFORMATION

................................ ................................ ..... 34 A. Applicant Information

................................ ................................ ................................ ................................ .... 34Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 3 B. Public/Private Partnerships

................................ ................................ ................................ .......................... 34 C. Project Proposal

................................ ................................ ................................ ................................ ........... 34 D. Existing Landing Aids at Local Airport

................................ ................................ ................................ .......... 35 E. Project Cost

................................ ................................ ................................ ................................ .................. 35 F. In

- Kind Contributions**

................................ ................................ ................................ ................................ . 35 G. Is this application subject to review by state under Executive Order 12372 Process?

................................ 35 H. Is this applicant delinquent on any federal debt?

................................ ................................ ......................... 36 

### APPENDIX B: LETTER OF SUPPORT

................................ ................................ ............................... 37Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 4 

### INTRODUCTORY LETTERTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 5 

### EXECUTIVE SUMMARY

The Tri

- Cities Airport Commission is requesting a Small Community Air Service Development grant in the amount of $250,000 to fund a minimum revenue guaran tee on American Eagle for regional jet service between Tri

- Cities and Dallas/Ft. Worth

. In addition to the amount requested from the Department, organizations in the community have pledged $50,000 in cash that can be applied to the minimum revenue guarant ee. Tri

- Cities Regional Airport will provide in

- kind contributions valued at $132,000 in the form of landing fee waivers over a period of two years from the date service begins.
Dallas/Ft. Worth service is propose d because the market generates 15.7 passe ngers per day each way (PDEW) , and it would provide service in one of Tri

- Cities' largest markets without nonstop service . In addition to the local market, the proposed service could provide connections to 88 other markets American serves from Dallas/Ft. Worth. With Tri

- Cities' current air service, many of the markets American serves from Dallas/Ft. Worth now require more than one connection for Tri

- Cities travelers. All Tri

- Cities markets America n and American Eagle could logically flow via Dallas/Ft. Worth

- Tri

- Cities generated 1 53 PDEW in 2010 at a high average one - way fare of $2 56 each way or $512 roundtrip.

Tri

- Cities

- Dallas/Ft. Worth service could likely duplicate American Eagle's success in the Asheville

- Dallas/Ft. Worth market , which was inaugurat ed on a seasonal basis in April 2010

. American Eagle operated the service in the similarly

- situated Smoky Mountain community as planned from April through October 2010 and resumed service in 2011 . T he market generated a load factor of 7 9

. 5% through its d uration in 2010, with four of the seven months having load factors in excess of 80%. American Eagle's resumption of the seasonal Asheville

- Dallas/Ft. Worth service , coupled with a high load factor in the market, is a strong indication the market has been successful , and the success in Asheville could translate to success in Tri

- Cities

. Tri

- Cities' average domestic ex

- Allegiant fare s are high, and stood at $2 24 each way in 2010

-- up from $193 in 2009. This compares to an average domestic fare among all a irports in the lower 48 United States of $15 7 in 2010 and $143 in 2009.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 6 Tri

- Cities is currently served by three carriers to four hubs: Atlanta, Charlotte , Chicago, and Detroit (althoug h Delta will discontinue Detroit service in September)

. Allegiant carri es only point

- to

- point traffic on its service from Tri

- Cities to Orlando/Sanford and St. Petersburg / T a m p a and does not connect traffic beyond these destinations.

Tri

- Cities is a large m arket

. 639 ,000 residents live within a one hour drive of the airport; 1,193 ,0 00 residents live within a 9 0

- minute drive of the airport. Parts of northeastern Tennessee and southwest ern Virginia lie within one hour of the airport, and the extended catchment area extends into North Carolina a n d E a s t e r n K e n t u c k y

.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 7 

### AIR SERVICE OVERVIEW

Catchment Are a and Access to Alternate Airports

N e a r l y 6 4 0 ,000 reside nts live within a one hour drive of Tri

- Cities Regional Airport , and 1,193, 000 residents live within 9 0

- minute drive of the airport

. Tri

- Cities Regional Airport is the closest Airport to most residents within a one hour drive o f the airport, while 9 0 minute drive time coexists with portions of the Asheville and Knoxville airport catchment areas. Downtown Kingsport and the Knoxville airport are separated by 113 road miles and roughly two driving h ours. The airport in Asheville is 98 road miles from downtown Kingsport, taking over 1.5 hours to traverse. In August 2011, the airport in Knoxville had a daily average of 55 nonstop flights to 16 hubs on 6 network carriers at an average fare of $221 in 2 010. The airport in Asheville had a daily average of 29 nonstop flights to 9 hubs on 5 network carriers at an average fare of $171 in 2010. These compare to Tri

- Cities which has 16 average daily flights on 3 carriers to 4 hubs at an average fare of $224 in 2010.

Exhibit 1: Tri

- Cities Regional Airport Catchment AreaTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 8 

### Tri - Cities' Existing Air Service

Three network carriers, American, Delta and US Airways , serve Tri

- Cities from four hubs. American serves Tri

Cities from Chicago with two flights (one fligh t on Saturday). Delta currently operates service to Atlanta and Detroit , (Detroit will be discontinue d in September ) , and US Airways serves Tri

- Cities from Charlotte . In addition to the network carrier service, Allegiant operates less

- than

- daily service t o Sanford/Orlando and St. Petersburg

. Allegiant operates its service as point

- to

- point service and does not connect traffic beyond these destinations as the network carriers connect passengers beyond their hubs.
The most recent addition to Tri

- Cities' air service was American , entering the market in July 201 1 wi th two daily round trip s to Chicago.
Tri

- Cities has northbound and southbound service, but only one wester n gateway and no gateway to the Greater Southwest

– the proposed Tri

- Cities

- Dallas/Ft. Worth service would provide service in not only to Dallas/Ft. Worth, but it would also provide connections to many markets that currently require a double connection whe n traveling to or from Tri

- Cities

. Exhibit 2 : Routes Currently Operated from Tri

- Cities Regional AirportTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 9 T he number of departures per day, average seats per departure and seats per day by market and by carrier for December 2011 are displayed in Exhibit 4. Delta will account for 4 8

. 9 % of Tri

- Cities' capacity in December 2011, US Airways will account for 30.1 % and American will account for 9.1 % of Tri

- Cities' capacity. Collectively, the three network carriers will account for 8 8

. 1 %, and Allegiant will a ccount for 1 1.9 % of Tri

- Cities' total capacity.

Tri

- Cities' capacity by hub is highly concentrated at Atlanta and Charlotte . Delta's service to the Atlanta accounts for 48.9 % of total capacity and more than half

– 55.6 %

– of network carrier capacity. The US Airways service to Charlotte accounts for 30.1 % of total capacity and 3 4.2 % of network carrier capacity. The combined Atlanta and Charlotte service account s for 89.7 % of network carrier capacity in Tri

- Cities

.
Exhibit 3 : Departures per Day * , Seats per Depart ure and Seats pe r Day by Market and Carrier at Tri

- Cities

– December 2011

* T he number of departures per day is displayed in increments of sevenths (because there are seven days in a week) . "1 6/7" is read as one flight seven days a week wi t h a second flight operated six of the seven days in a week.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 10 

### Air Service Development Efforts

Tri

- Cities Regional Airport officials have met on 1 3 occasions with 1 0 airlines in the first six months of 2011 to discuss air service development and present business cases for new service. These meetings have included two meetings with American Eagle to discuss both existing Tri

- Cities

- Chicago service and potential Tri

- Cities

Dallas/Ft. Worth service. Other meetings of note include four meetings with United Airlines to discuss Washington Dulles and New ark service , US Airways to discuss Washington Reagan service, and Vision Airlines and Spirit Airlines to discuss Florida Service. Over the past five year s, Tri

- Cities has been successful in attracting American Eagle to operate Tri

- Cities

- Chicago service and successful with Allegiant for service to Orlando/Sanford and St. Petersburg

.
Exhibit 4 : Tri

- Cities Regional Airport Air Service Development Meetings with Airlines

– March 2011 through June 2011Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 11 

### Market ing and Promotion of Tri - Cities' Air Service

Tri

- Cities Regional Airport actively markets air service within the Tri

- Cities media market. The Airport's advertising and marketing stresses the convenience of flying from Tri

- Cities and highlights attraction s at destinations served from Tri

- Cities

. In 2011, the Airport has budgeted $ 2 7 5 , 0 0 0 to market air service. The 2011 media plan calls for a p p r o x i m a t e l y $ 9 7 , 5 00 in television advertising, $2 9 , 0 0 0 in radio advertising, $3 0 , 000 in print advertising and $ 4 0 ,000 in on

- line advertising , a l o n g w i t h o t h e r c r e a t i v e a n d m i s c e l l a n e o u s e x p e n d i t u r e s

. On

going annual advertising and marketing can be supplemented with destination

- sp ecific advertising to market new routes just prior to the inauguration of new service , and the proposed Tri

- Cities

- Dallas/Ft. Worth service would be marketed se parately from the Airport's planned marketing and advertising campaigns.

Exhibit 5 : Examples of Tri

- Cities Regional Airport 's AdvertisingTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 12 

### AIR SERVCE DEVELOPMENT NEEDS AND DEFICIENCIES
Capacit y Trend s and Discontinued Air Service

Ex

- Allegiant capacity at Tri

- Cities reached a peak in 200 5 , and was down 3 5 % to 712 seats per day each way in 2010. Since 2005, Tri

- Cities has lost network carrier service to Nashville, Cincinnati, Orlando, and Memphis

– service that accounted for more than one - third of Tri

- Cities’ capacity in 2005 . Without American's new Tri

- Cities

Chicago service in beginning in July 2010, Tri

- Cities' ex - Allegiant ca pacity would be down much more since 200 5

. Exhibit 6 : Network Carrier Seats per Day Ea ch Way at Tri

- Cities Regional Airport by Carrier

– 2001

- 2010 (DOT T

- 100 data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 13 While Tri

- Cities' capacity appears only marginally down compared to recent years when Allegiant data is included, Allegiant serves only Sanford/Orlando and S t. Petersburg / T a m p a from Tri

- Cities . Unlike the network carriers, Allegiant only carries po int

- to

- point traffic to the t w o destinations it serves from Tri

- Cities and does not provide connecting service to the larger worldwide route networks provided by the net work carriers. Further, Allegiant's service is not operated on a daily basis.
Exhibit 7 : Network Carrier and Allegiant Seats per Day Ea ch Way at Tri

- Cities Regional Airport by Carrier

– 2001

- 2010 (DOT T

- 100 data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 14 

### Traffic Trend

s

Tri

- Cities' ex - Allegiant domestic traffic peak corresponds with the capacity peak in 2005

. In 2005 , Tri

- Cities generated 439,460 domestic ex

- Allegiant origin and destination passengers. In 2010, the domestic ex

- Allegiant tr affic was dow n 34.7 % versus 2005 to 286,940 origin and destination passengers. Tri

- Cities' international traffic is up 1.8 % since 2006, and Allegiant's traffic is up more than three fold since its first year of Tri

- Cities service in 2007.

Exhibit 8 : Annual D omestic and International Origin and Destination (O&D) Passengers at Tri

- Cities Regional Airport Year

- End Fourth Quarter 2001

- 2010 ( DB1B data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 15 When the annual origin and destination data is converted to passengers per day each way (PDEW), Tri

- Cities generated 393 domestic ex

- Allegiant PDEW, 92 Allegiant PDEW and 45 international PDEW in 2010.

Exhibit 9 : Domestic and International Passengers per Day Each Way (PDEW) at Tri

- Cities Regional Airport Year

- End Fourth Quarter 20 01

- 2010 (DB1B data)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 16 

### Leakage to Other Airports in the Region

The size of Tri

- Cities’ population base and the economic activity in the region coupled with enplanement data would suggest that Tri

- Cities faces significant leakage to other airports in the region . Using each airport’s respective Combined Statistical Area as the basis for comparison, Tri

- Cities capture d only 0.7 passengers per resident in 2010 . This is 46% fewer than Knoxville and 53% fewer than Asheville. Using Gross Domestic Product, a bet ter indicator of travel demand, shows a similar pattern with Tri

- Cities generating 34% less passengers per dollar of GDP than Knoxville and 49% less passengers per dollar of GDP than Asheville. Extrapolating this data would suggest that the Tri

- Cities Comb ined Statistical Area generates more than 700,000 domestic origin and destination passengers per year. This is 350,000 more passengers than the airport currently captures, with regional airports being likely beneficiaries of Tri

- Cities’ relatively low leve ls of service compared to Knoxville and relatively high fares compared to Asheville.

Exhibit 1 0 : Airline Passengers per Capita and per Million Dollars of Gross Domestic Product at Tri

- Cities, Knoxville and AshevilleTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 17 

### Domestic Fare Trend

s

The aver age ex - Allegiant domestic fare at Tri

- Cities was $ 224 each way in 2010. Tri

- Cities' average domestic ex

Allegiant fare was at its lowest point in 2005 when the average fare was $173 and traffic peaked. Versus 2005, the fare is up $51 each way or 29.5%. T he average fare has remained near or over $200 per direction since 2005

. Tri Cities’ ex

- Allegiant domestic traffic was down 35% on 35% less capacity and 30% higher fares since its peak. While network carrier fare structures would likely not change signifi cantly with the introduction of new network carrier service to a new destination, Tri

- Cities travelers would benefit as more of the lowest fares within existing fare structures are made available with the additional capacity.

Exhibit 1 1 : Ex

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

- Way Fare at Tri

- Cities Regional Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 18 

### Twentieth Highest Domestic Fare in the United States

The average domestic ex

- Allegiant Tri

- Cities domestic fare was $224 in 2010 , and this fare ranked as the twentieth highest domestic fare among all lower 48 airports with at least 100,000 domestic origin and destination (O&D) ex

- Allegian t passengers in 2010. The average domestic ex

- Allegiant fare among all lower 48 airports in 2010 was $158, so the average domestic Tri

- Cities fare was 41.7 % higher , or $66 higher each way ($132 roundtrip) , than the average lower 48 airport.

Exhibit 1 2 : A verage Domestic Ex

- Allegiant One

- Way Fares at Lower 48 Airports with at Least 100,000 Domestic O&D Passengers

– Year

- End Fourth Quarter 2010 (DB1B data)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 19 

### International Traffic and Fare Trends

Even as domestic traffic has fallen on reduced capacity, Tri

- Cities' international traffic has remained constant in recent years and has actually increased 10 PDEW to 45 PDEW in 2010, up 28% since 2001. The average international fare stood at $ 642 each way in 2010

– approaching the peak of $ 681 in 2008 and up 16

. 5 % from 2009.

Exhibit 1 3 : International Passengers per Day Each Way (PDEW), and Average One

- Way International Fare at Tri

- Cities Regional Airport

– Year

- End Fourth Quarter 2001

- 2010 (DOT T

- 100 and DB1B data)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 20 

### STRATEGIC PLAN
Proposed New Route

Tri

- C ities Regional Airport and its community part n ers in Tri

- Cities are requesti ng Small Community Air Service Development funds to support a minimum revenue guarantee for regional jet service on American Eagle between Tri

- Cities and Dallas/Ft. Worth. The pro posed new service would benefit a mix of business and leisure travelers.

An American Eagle Embraer 140 Regional Jet after Arrival from Chicago at Tri

- Cities Regional Airport 

### Goals

Tri

- Cities has four goals with its Small Community Air Service Developmen t Grant proposal for service to Dallas/Ft. Worth.

 Better access to Dallas/Ft. Worth and the connecting markets served via Dallas/Ft. Worth , particularly connecting markets in Texas such as Houston, Austin, San Antonio, McAllen and markets in Latin America.

 Lower fares in the local Tri

- Cities

- Dallas/Ft. Worth market and the largest connecting markets beyond Dallas/Ft. Worth

.  Recapture catchment area traffic leaked to other airports

.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 21 

### Target Airline Support

Tri

- Cities Regional Airport has met with American Eagle on two separate occasions in 2011 and American Eagle has expressed interest in the proposed Tri

- Cities

- Dallas/Ft. Worth service

. It should be noted American Eagle has used Small Community Air Service Development funds to begin service in two market s recently: Sioux Falls

- Dalla s/Ft. Worth and Springfield, IL

- Dallas/Ft. W orth and began Joplin

Dallas/Ft. Worth and Grand Island

- Dallas/Ft. Worth service under the Essential Air Service program. All four markets are examples of American Eagle willing to enter markets if risk is abated.


### Tri - Cities - Dallas/Ft. Worth Traffic and Fare Trends

The Tri

- Cities

- Dallas/Ft Wo rth market size maintained its size of roughly 16 PDEW in 2010 and decreased only slightly (1.8%) as the fare rose 15.5% to $216 from 2009. Hi storically, as many as 20% more passengers have existed in the market at similar fares. It is only reasonable to expect that the actual market size is significantly larger as both neighboring airports have nonstop service and lower fares to Dallas/Ft. Wort h.

Exhibit 1 4 : Tri

- Cities

- Dallas/Ft. Worth ( DFW and DAL ) Passengers per Day Each Way ( PDEW )

– Year

- End Fourth Quarter ( DB1B data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 22 Analysis of quarterly data indicates Tri

- Cities

- Dallas/Ft. Worth traffic peaked in 2 009 in third quarter, and moved only in seasonal cycles as the average fare rose more than $40 each way. The limited elasticity of the Tri

- Cities

Dallas/Ft. Worth market is a favorable point for discussions with American Eagle.

Exhibit 1 5 : Tri

- Cities

- Da llas/Ft. Worth ( DFW and DAL ) PDEW and Average Fare

– Fourth Quarter 2008 through Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 23 

### Connecting T

raffic and Revenue on American via Dallas/Ft. Worth

Tri

- Cities

- Dallas/Ft. Worth service co uld connect with 88 markets American and American Eagle serve from their hub in Dallas/Ft. Worth that generated Tri

- Cities traffic in 2010

. Tri

- Cities has no nonstop network carrier service that provides access to the deep southwest , and the proposed serv ice would enable new single connections in many markets that cannot be reached from Tri

- Cities with a single connection. Of the 88 airports displayed on the map below, 30 of the airports now require a dou ble connection to or from Tri

- Cities because they a re not served nonstop from Atlanta, Charlotte, Detroit , or Chicago

.
Exhibit 1 6 : Non

- Circuitous Markets American Could Serve with Tri

- Cities

- Dallas/Ft. Worth Service

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 24 The 30 largest Tri

- Cities markets American could flow via its hub in Dallas/Ft. Worth generated 142 PDEW in 2010; all markets that could flow via Dallas/Ft. Worth generated 153 PDEW. These 153 PDEW account for more than one

- third

– 3 8.6 %

– of the total 393 domestic ex

- Allegiant PDEW Tri

- Cities generated in 2010 The local Dallas/Ft. Worth market was the largest market that could be logically served with new nonstop service,
w ith the LA Basin and Las Vegas being the two largest connecting mark ets as measured by origin and destination traffic. Two other m arkets in Texas, Houston and San Antonio , are included in the ten largest markets, and Austin ranks as the eleventh (1 1 th) largest market.

Exhibit 1 7 : Origin and Destination Passengers and PDEW in the 30 Largest Markets American Could Flow via Dallas/Ft

. Worth

– Year

- End Fourth Quarter 2010 (DB1B data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 25 The average one

- way fare in the 30 largest Tri

- Cities markets American could flow via Da llas/Ft. Worth was $ 245 in 2010; all markets that could flow via Dallas/Ft. W orth generated an average fare of $ 257

. 17 of the 30 largest markets generated an average fare higher than $ 245 ; smaller markets tended to generate higher fares than the larger markets toward the top of the list.

Exhibit 1 8 : Average One

- Way Fare in the 30 Largest Markets American Could Flow via Dallas/Ft. Worth (Excludes Allegiant Data)

– Year

- End Fourth Quarter 2010 (DB1B data)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 26 

### American Eagle's Success in the Asheville - Dallas/Ft. Worth Market

In April 2010, American Eagle began service in the Ashev ille

- Dallas/Ft. Worth market with one daily round trip on a seasonal basis

. American Eagle's performance in the Asheville

- Dallas/Ft. Worth market could likely serve as a proxy f or how Tri

- Cities

- Dallas/Ft. Worth service could perform.
As illustrated in Ex hibit 1 9 , American Eagle generated a load factor of 7 1.8 % in the first month it operated the service, and the load factor grew to 83. 6 % in July 2010. Apparently satisfied with the initial performance of the market, American returned to operate Asheville

- D allas/Ft. Worth in 2011. During the route’s first season, between April and October 2010 , American Eagle's Asheville

- Dallas/Ft. Worth load factor was 7 9.5 %.

Exhibit 1 9 : American Eagle Asheville

- Dallas/Ft. Worth Flights per Day Each Way, Load Factor by Mo nth a nd Average April 2010

- October 2010 Load Factor (DOT T

- 100 Data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 27 American Eagle's Asheville

- Dallas/Ft. Worth service, which began in second quarter 20 10 , has resulted in terrific service

- based stimulation of deman d between Asheville and Dallas/Ft. Worth

. T he market produced an average of 11

. 2 PDEW b etween second and fourth quarter 2009

. Over the same period in 2010, the market produced an average of 2 0

. 2 PDEW, a 80.4 % increase over 2009.

Exhibit 2 0 : Asheville

- Dallas/Ft. Worth Passengers per Day Each Way (PDEW) and Average One Way Fare

– First Quarter 2008 through Fourth Quarter 2010 (DB1B Data)

This Section Continued on Next PageTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 28 If the Tri

- Cities Dallas

- Ft. Worth market size were to increase as the Ashev ille

- Dallas/Ft. Worth quarterly market size increased year - over - year with the introduction of nonstop service, Tri

- Cities

- Dallas/Ft. Worth would increase to 27.9 PDEW in second quarter 2010, 27.5 PDEW in third quarter 2010 and 34.3 PDEW in fourth quarter 2 010. The actual Tri

- Cities

- Dallas/Ft. Worth average market size was 16.5 PDEW from second quarter 2010 to fourth quarter 2010 and would have been 29.9 PDEW with the year

- over - year Asheville

- Dallas/Ft. Worth market size growth. Historically, the Tri

- Citie s - Dallas/Ft. Worth market size has been larger than the Asheville

- Dallas/Ft. Worth market size and could easily grow at least as much as the Asheville market size grew with the introduction of nonstop service.
Exhibit 2 1 : Actual Asheville

- Dallas/Ft. Wort h PDEW, Actual Tri

- Cities

- Dallas/Ft. Worth PDEW and Tri

- Cities

Dallas/Ft. Worth Market Size at Asheville

- Dallas/Ft. Worth Growth

– First Quarter 2008 through Fourth Quarter 2010 (DB1B Data)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 29 

### Grant Amendments/

Alternate Strategies

Nonstop Tri

- Cities

- Dal las/Ft. Worth service is the goal of the community's Small Community Air Service Development (SCASD) proposal. The community is proposing SCASD funding in the amount of $ 2 50,000 that will be supplemented with $ 50 ,000 in cash from community

- based business and economic development organizations to offer a minimum revenue guarantee to American Eagle for Dallas/Ft. Worth service. An additional $ 1 3 2 , 0 0 0 of in

- kind marketing , advertising , p r o m o t i o n a n d l a n d i n g f e e w a i v e r s would supplement the cash incentives offered by the commu nity for the service. Analysis of traffic and revenue data indicates the proposed service should be an appealing o pportunity for American Eagle. If a grant is awarded for Tri

- Cities

- Dallas/Ft. Worth service, and the community is not successful in its effo rt to recruit American Eagle to Dalla s/Ft. Worth, Tri

- Cities Regional Airport would ask to Department to consider reallocation of the award funds for service to an alternate hub on a network carrier . Potential routes would include Washington on Delta, US Airways, or United; Houston on United ; New York on American, Delta, US Airways, or United; Miami on America n

.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 30 

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

While t h e Tri

- Cities Airport C o m m i s s i o n is the project sponsor and is a partner in the project , th e other p r o j e c t p a r t n e r i s t h e R e g i o n a l A l l i a n c e f o r E c o n o m i c D e v e l o p m e n t

. 

### Project Funding

Tri

- Cities Regional Airport is requesting a Small Community Air Service Development grant of $ 2 50,000 for its proposed minimum revenue guarantee for servi ce between Tri

- Cities and Dallas/Ft. Worth on American Eagle. T h e R e g i o n a l A l l i a n c e f o r E c o n o m i c D e v e l o p m e n t ha s pledged $ 50,000 in cash to supplement the r e q u e s t e d award

. The total cash pledged by t he community

- based organization to 20 % of the requested grant amount. In addition, the Airport will provide up to $132,000 of in

- kind support in the form of m a r k e t i n g , a d v e r t i s i n g , p r o m o t i o n landing fee waivers over two years for the proposed Dallas/Ft. Worth ser vice

.
Ex hibit 2 1 : Sources and Types of Proposed Project Funding

.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 31 

### Implementation Timeline

Tri

- Cities Regional Airport will begin discussions with American Eagle immediately after learning the Department awards a Small Community Air Service Developmen t grant for the proposed Tri

- Cities

- Dallas/Ft. Worth service. The timing of the announcement, expected in September, will provide sufficient time to meet with American Eagle to continue previous discussions and provide time for American Eagle to perform f urther analysis of the market. Assuming discussions are successful in September and October and American Eagle decides to enter the Tri

Cities

- Dallas/Ft. Worth market, the next major schedule change date which would provide sufficient time for advance boo kings is the April 2012 schedule change. American Eagle's annual April schedule change typically occurs within the first seven days of the month. Once the service begins, Tri

- Cities Regional Airport will remain in close communication with American Eagle to monitor the performance of the route.

Exhibit 2 2 : Proposed Project TimelineTri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 32 

### PROJECT MONITORING AND FINANCIAL CONTROL Success Metrics
Four goals have been established to measure the success of the proposed project. The goals of the project are ai med at increasing traffic and lower fares. These goals are objective and can be measured by comparing year

over - year market size changes and changes in fares on a quarterly basis as DOT traffic and revenue data is published. Another measure of success wil l be American Eagle's load factor performance on the flights operated in the proposed market. High load factor s (defined as load factors in the upper 70s or greater) will constitute traffic metric success. The amount of subsidy required by American Eagle will also provide an indication of the route's success. Project Goals Success Metric

 Nonstop access to Dallas/Ft. Worth and less circuitous connections to markets served by Americ an and American Eagle via Dallas/Ft Worth

.  Inauguration of nonstop Tri

- Citi es - Dallas/Ft. Worth service.

 Stimulation of the Tri

- Cities

- Dallas/Ft. Worth market size and the markets served by American and American Eagle via Dallas/Ft. Worth

.  Tri

- Cities

- Dallas/Ft. Worth market size growth and market size growth in the markets that c ould connect to markets beyond Dallas/Ft. Worth.

 Lower fares in the Dallas/Ft. Worth market and the markets connecting beyond Dallas/Ft. Worth.  Quarterly year

- over - year declines in fares for the local Tri

- Cities

- Dallas/Ft. Worth market and the largest mar kets beyond Dallas/Ft. Worth

.  Recapture catchment area traffic leaked to other airports in the region.  Increased retention (and less leakage) of the traffic generated in Tri

- Cities' immediate catchment area.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 33 

### Legal Sponsor

The Tri

- Cities Airport Commission is the legal sponsor responsible for administering th e program , and Tri

- Cities Airport Commission is a government entity.

Tri

- Cities Regional Airport Commission P.O. Box 1055 Blountville, TN 37617

- 1055 Patrick W. Wilson Executive D irector 423

- 325

- 6001 (office) 423

- 325

- 6060 (fax)



### Financial Controls
As the sponsor, the Tri

- Cities Airport Commission will be the responsible partie s for all fiscal matters and the Department's reporti ng requirements. The Tri

- Cities Airport Commission is established as a public governing body. As a public entity , the Department can be assured that proper financial controls are in place to guarantee that the Department ’s Grant will be used in accordance with any subsequent agreement. T he Tri

- Cities Airport Commission understands that the Grant is a reimbur sable grant, meaning the Commission is responsible for program expenditures and will submit invoices to the Department for reimbursement, based on a percentage of the total gr ant request.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 34 

### APPENDIX A: REQUIRED SUMMARY INFORMATION A. Applicant Information

Not a Consortium
Interstate Consortium
Intrastate Consortium Community now receives EAS subsi dy Community (or Consortium member) previously received a Small Community Grant If previous recipient: Date of Grant: 7/26/2002 Expiration Date of Grant: 7 / 26 /200 5 

### B. Public/Private Partnerships

Public

 Tri

- Cities Regional Airport
Privat e

 R e g i o n a l A l l i a n c e f o r E c o n o m i c D e v e l o p m e n t



### C. Project Proposal

Marketing Upgrade Aircraft New Route Travel Bank Service Restoration Subsidy Surface Transport ation Regional Service Revenue Guarantee Launch New Carrier Start

- up Cost Offset First Service Study S ecure Additional Se rvice Other (explain below)

T r i

- C it ie s R e gi on al Ai rpo rt i s requesting a S ma ll C om mu ni ty A ir S er vi ce D ev elo pm ent g r a n t t o p r o vi de a m in im u m r e v e n u e g u a ra nte e f o r r e g i o n al j et s e r v i c e b e t w e e n T r i

- C i t i e s a n d D a l l a s / F t. W or th o n A m e r ic an Ea gl e

.Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 35 

### D. Existing Landing Aids at Local Airport

Full ILS Outer/Middle Marker Published Instrument Approach Localizer Other (specify)



### E. Project Cost

F. In - Kind Contributions**

For funds in lines 5 a (Airport In

- Kind contribution) and 5 b (Other In

- Kind contribution), please describe the source(s) of fund(s) for each. (5a) Tri

- Cities Regional Airport will provide a d v e r t i s i n g , m a r k e t i n g , p r o m o t i o n a n d landing fee waivers valued at up to $ 132 ,0 00 over two years for the proposed Tri

- Cities

- Dallas/Ft. Worth service

. 

### 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. 12372Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 36 

### H. Is this applicant delinquent on any federal debt?

No Yes (explain)Tri

- Cities Regional Airport ; Blountville , Tennessee

Proposal Under the Small Community Air Service Development Program; Docket D OT

- OST

- 2011

- 0119 37 

### APPENDIX B : L E T

T E R O F S U

P P O R T