### Docket: DOT

- OST

- 20 1 0

- 01 24 Before the Office of the Secretary of Transportation U.S. Department of Transportation



# Glacier Park International Airport / Kalispell, Montana
Proposal u nder the Small Community Air Service Development Program

An Integrated Program of New Service Development via; 

### Start

- up Cost Offsets, Advertising/Marketing , and Revenue Guarantees In Support of New Service to/from San Francisco on United Express

Sponsor: Glacier Park International Airport Kalispell, Montana
Cindi Martin

– Airport Director Congressional Code: MT

- 001
Dun & Bradstreet Number : 119522167



### August 2 7 , 20 10Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 2 

# Table of Contents

Description Page number

Table of Contents 2 Airport Letter 3 Summary Information (Appendix B) 4

Introduction and Proposal Objectives 7 Kalispell Location and Population 9

Air Service & Traffic 11 Average Fares 1 4 Traffic by Region 16 Alternative Airports 17

Traffic Leakage 18

Air Service Needs and Deficiencies 20

Glacier Park Previous Grant Award 2 3 Local Air Service Development Efforts 2 4 Detailed Explanation of Proposal 25 Extenuating Factors Affecting Glacier Park Air Service 30 A Strategic Plan for Success 31 Public/Private Partnership & Air Service Advisory Group 32 Grand Funding 34

T

arget Audience & Marketing Plan 35

G rant Timeline, Milestones and Monitoring 37

Performance Measurements 38

Financial Controls and Return on Investment 3 8 Use of Department Funds and Route Self Sufficiency 39 Alternative Plan and Legal Sponsor 40 Airport Profile 41 Community Information 42 Summary 4 8Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 3 

# Introductory LetterGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 4 

# Summary Information

Small Community Air Service Development Program
Docket DOT

- OST

- 2010

- 0124



### A. Applicant Information

Not a Consortium Community now receives EAS subsidy
Interstate Consortium Intrastate Consortium Community previously received a Small Community Grant If previous recipient, D ate of Grant: August 18, 2006
E xpiration date of G rant: June 1, 2009



### B. Public/Private Partnership

Public:

1. Glacier Park International Airport
2. Montana Department of Commerce Regional Development Office

Private:

1. Mont ana West Economic Development
2. The Flathead Port Authority
3. Whitefish PartnersGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 5 

### C. Project Proposal

Marketing Upgrade Aircraft New Route
Personnel Increased Frequency Low Fare Service
Travel Bank Service Restoration Subsidy Surface Transportation Regional Service Other (Specify)
Revenue Guarantee Launch New Carrier Start Up Cost Offset First Competitive Service Study Secure Additional Carrier



### D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instrument Approach
Loc alizer Other:



### E. Project Cost

1. Federal amount requested: $ 500,000
2. State cash financial contribution: $ 0
3. Local cash financial contribution: $ 50,000
3a. Airport cash funds: $ 0
3b. Non

- Airport cash funds: $ 50,000
3c. Total local cash funds: $ 50,000
4. TOTAL CASH FUNDING: $ 55 0,000
5. Local funds contributed from already existing Programs of projects included in line 3c: $ 0
6. Local funds contributed from new commitments
Or new resources included in line 3c: $ 50,000 $39,000 MT West Econ Dev $10,000 Big Mtn Merchants $ 1,000 Glacier Country
7. Airport In

- Kind contribution: $ 0
8. Other In

- Kind contribution: $ 0
9. TOTAL IN

- KIND CONTRIBUTIO N: $ 0
10. TOTAL PROJECT COST: $ 55 0,000Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 6 

### F. Enplanements at Airport

2000 : 157,850
2001 : 154,575
2002: 149,660
2003: 1 54,650
2004: 1 68,057
2005: 1 78,072
2006: 1 91,293
2007: 1 76,319
2008: 1 72,845
2009 : 159,758



### G. Is Application Subject to Review by State Under Executive Order 12372 Process?

This application was made available to the State on ______. Program is subject to review, but has not been selected by the State. Program is not covered.



### H. Is Applicant Delinquent on any Federal Debt?

NoGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 7 

# Introduction and Proposal Objectives

Kalispell’s Glacier Park International Airport and the air service it offers is a key driver of the
economic health of Montana’s Flathead Valley. The valley is one of the most isolated areas of the country, some 121 miles from the Interstate highway system and very long distances, by road or by air , fr om major cities like Seattle ( 580 miles by road and 379 by air ), Denver ( 1,140 miles by road and 753 by air ) or Minneapolis (1,303 miles by road and 1,025 by air ).

Yet the Flathead Valley economy is highly dependent on access to the rest of the nation an d to the world beyond. This is true not only for the estimated 186,000 residents of the Glacier Park
catchment area but also critical to region’s economy, particularly for the tourism industry

.

The tourism industry of the Kalispell area must compete for tourist and their dollars with other, less
isolated venues. Northwest Montana’s summer and winter vacation sites and activities are among the best in the world. However, reasonably priced air service and adequate airline capacity are critical to the efforts of the local tourism industry to attract a fair share of American
and international touris ts and their leisure spending.

The Glacier Park International Airport has some of the highest air fares in the entire Northwest region. The Delta/Northwest merger has altered the competitive balance in the market and left
Delta with a majority market share. This market share concentration does not bode well for airfare moderation; instead it implies even higher fares are in Kalispell’s future.

Furthermore, Kalispell’s air service is not oriented toward the region’s largest travel communities of interest. A full 45% of Kalispell’s current traffic demand is westbound, yet only 28 % of its current capacity is westb ound.

Kalispell was very fortunate to receive a 2006 SCASD Grant that was used to recruit successful United Airlines service to Denver. That Grant and the successful entry of United into the market is even more important in light of the Delta/Northwest me rger and the resulting market share concentration. Without United’s market presence Delta would have an estimated 65 % Kalispell
market share.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 8 It remains critical to address Kalispell’s air service challenges ; high fares, market share
concentration and westbound capacity deficiencies. Kalispell has demonstrated it supports new air service and used its first grant wisely and to enormous benefit.

The Airport proposes a new SCASD Grant t h at will address these significant challenges. Specifically this Grant will be for the risk abatement and marketing of improved westbound service. The primary new route/carrier target for this Grant is United Airlines service to San Francisco. This service would bring more capacity and competition to the market and thus lower fares, strengthen United’s overall footprint at Kalispell, help balance out the market concentration, and provide a nonstop link between Kalispell and its number one market (California) via United’s large SFO hub. Availability of modest risk mitigat ion is essential for network carriers to consider new service. This is particularly so with United in 2011 as it will most likely be consummating a merger with Continental in that timeframe.

Kalispell, the Department and United teamed up before to bring the successful United Denver
service to the market. This Grant proposal will build on that success.

Objectives for Program:

**•** Bring additional capacity to Glacier Park International

**•** Lower average airfares through increased capacity and competition

**•** Add nonstop westbound service for the 45% of Kalispell traffic that is westbound

**•** Reduce inefficient leakage to Missoula and Spokane

**•** Broaden United Airlines market stance to balance Delta market share concentration

Means to Achieve Objectives:

**•** Use SCASD Grant and local match to provide a partial startup phase revenue guarantee for new westbound service

**•** Build on the knowledge and learning from the highly successful first SCASD Grant

**•** Leverage local community, business and resort interest in improved air service to maximize support for new service

Course of Action to Support Means:

**•** Provide startup cost offsets for the new carrier

**•** Provide revenue guarantees to ensure the success of the new service

**•** Provide an aggressive multi level marketing program to support the new flightsGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 9 

# Kalispell & the Flathead Valley : Location & Population

Glacier Park International Airport is the gateway for the Flathead Valley, and the communities of Kalispell, Whitefish, and Columbia Falls , Mo ntana, along with the world famous Glacier Na tional
Park

. The Airport serves a large and fast growing area that includes parts of Montana, Idaho, Alberta, Canada, and British Columbia, Canada.

The Airport’s catchment area (green shaded area) extends well over 100 miles to the west, north and east, mostly across rural terrain on two lane highways. Glacier Park International is the closest U.S. airport for portion of Canada included in the catchment area. The furthest extents of
this catchment a rea are somewhat attributable to Allegiant Air low fare service to Las Vegas. The Airport’s location near the junction of the two main highways of the region means it has enormous potential as a regional gateway; provided adequate capacity and reasonable f ares are available.

Approximately 186,000 U.S. and Canadian residents live in the Glacier Park International Airport catchment area. Local population has grown by nearly 20% since 2000. This growth rate outpaced much of the rest of the mountain west for the same period. The vast majority of thisGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 10 growth was in the immediate Kalispell

– Whitefish

– Columbia Falls Micropolitan area, with very little of the growth occurring on the Canadian side of the border.

The more detailed topography and city/highway map below illustrates Glacier Park’s central location in the Flathead Valley and near the junction of the two major highways of the region. 74,710 75,997 77,248 79,167 80,635 82,535 84,824 87,200 89,104 89,624

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009MSA Population Kalispell Micropolitan Statistical Area Population

Nine Year Growth 20%Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 11 It also illustrates the significant distance from Kalispell to Interstate 90 as well as to nearby airports at Missoula, Spokane and Great Falls . The map topography only hints at the challenges that the mountainous terrain presents to travel by road.



# G lacier International Airport Air Service and Traffic

The Glacier Park Internatio nal Airport is served by four airlines . Delta Air Lines, now merged with Northwest, ha d a (combined) 51% share of traffic and capacity in 2009 and provides year round service to Minneapolis and Salt Lake City and summer seasonal service to Atlanta.

United Airlines serves Denver with the aid of the 2006 SCASD Grant and offers summer seasonal service to Chicago. Alaska/Horizon Air provide s service to Seattle and Allegiant Air operates twice weekly to Las Vegas 

### Carrier Routes Onboard % Total Seats % Total Flights % Total Load Factor Delta (Northwest) Atlanta 2,782 0.9% 3,520 0.9% 22 0.3% 79.0% Minneapolis 44,768 14.5% 60,230 14.6% 612 9.7% 74.3% Salt Lake City 111,224 36.0% 147,046 35.6% 2,861 45.5% 75.7% Alaska/Horizon Seattle 77,687 25.1% 114,258 27.6% 1,506 24.0% 68.0% United Denver 35,736 11.6% 45,254 10.9% 899 14.3% 79.0% Chicago 9,631 3.1% 11,716 2.8% 178 2.8% 82.2% Allegiant Las Vegas 27,339 8.8% 31,500 7.6% 210 3.3% 86.8%

Total 309,167 413,524 6,288 76.1% T100 data for year 2009 

## GLACIER PARK MARKET TRAFFIC AND CAPACITY: 2009Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 12 Traffic Demand

Glacier Park traffic has only seen net growth of 1.2%, comparing year 2009 to year 2000.

Given that the Kalispell area saw population growth of 20% in the same 2000 to 2009 period t his is compelling evidence of a shortfall of air service capacity and competitive pricing.

Becau se the Kalispell region is a recreational wonderland and tourism is a significant component of the local economy, Glacier Park air travel demand has a measurable seasonality

. Summer season traffic demand (Q3) has historically been more than twice that of w inter (Q1). 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 157,850 154,575 149,660 154,650 168,057 178,072 191,293 176,319 172,845 159,758 

## Glacier Park Enplanements: 2000

- 2009

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 61,990 79,210 137,830

73,590 69,620 77,850 131,930

66,310 59,750 73,380 106,890

61,920 

## Glacier Park O&D Traffic by Quarter: 2007

- 2009Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 13 Glacier Market Capacity

Glacier Park capacity also peaks in the summer and recedes in the winter. Given the significant and growing winter vacation industry of the area, does limited winter capacity constrict traffic or does it accurately reflect its true level?

Top Markets

The western orientation of Glacier Park traffic demand is illustrated by the makeup of the top twenty market list. The importance of San Francisco and the Bay Area is also clear. 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000

2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 121,980 146,780 183,782

113,388 107,644 126,360 174,974

110,720 105,372 109,158 138,936

88,412 

## Glacier Park Capacity by Quarter: 2007

- 2009

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Las Vegas

Seattle
Denver Minneapolis Salt Lake City
Dallas Atlanta Los Angeles San Francisco Chicago Phoenix Newark San Diego

Portland Orlando San Jose
Houston Sacramento Orange County Oakland 32,740 24,810 12,020 9,530 8,110 7,700 7,550 7,550 7,110 6,940 6,660 6,410 6,190 5,890 5,050 5,030 5,000 4,750 4,730 4,690 44.8 34.0 16.5 13.1 11.1 10.5 10.3 10.3 9.7 9.5 9.1 8.8 8.5 8.1 6.9 6.9 6.8 6.5 6.5 6.4 O&D Passengers PDEWGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 14 Eleven of Glacier Park’s top twenty markets are west of Kalispell. Seven of the top twenty are in California. San Francisco by itself is the ninth largest O&D market for Glacier Park, when combined with Oakland and San Jose the overall market becomes the fourth largest for Glacier
Park with some 16,830 annual O&D or 23 PDEW. The United hub at San Francisco would generate online connections to eight of Kalispell’s top twenty markets and fifteen of its top fifty

.



# Glacier International Airport Average Fares

Glacier Park has the highest average fares in the western Montana, northern Idaho and eastern Washington region.

In 2009 Glacier Park’s average one way net domestic fare was $196 . This is 7% higher than at Missoula and 45% higher than at Spokane. For the seven year period of 2002 to 2009 Gl acier Park’s average one way fare has increased 22%, from $161 to $196.

This is despite the addition of Allegiant Air Las Vegas service in 2007. Allegiant Air service tends to lower overall market average fares due to the large volume of traffic generated at very low net
fares to only one or a few destinations . Excluding Allegiant Air, Glacier Park’s 2009 average one way fare was $210, a 30% increase since 2002 and 56% higher than Spokane’s 2009 fare. The gap between Glacier Park’s high average fares and t hose of Missoula and Spokane is also $108 $112 $115 $120 $134 $135 $139 $135 $161 $165 $165 $174 $216 $222 $219

$196

$161 $166

$162 $169 $203 $206 $203
$184

$0 $50 $100 $150 $200 $250

2002 2003 2004 2005 2006 2007 2008 2009Average Fare. Spokane Glacier Park MissoulaGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 15 significant when the difference in type of market is considered. Spokane is a major regional population and business/commerce center and only minimally a tourism and leisure activity magnet. Thus a significant component of Spokane traffic demand is business travel. Missoula has some leisure traffic demand but again is a regional business/commerce center (including a large state university). Thus a significant portion of Missoula traffic demand is business travel.

Glacie r Park is primarily a tourism and leisure travel generator. Given that leisure average fares are typically lower than business travel fares due to longer advance purchase and weekend stays, this means that Glacier Park’s primarily leisure travelers are pay ing significantly higher average fares than Spokane or Missoula’s more business/commerce t raveler profile . While it is impossible to put precise numbers on this it is clear that Glacier Park is primarily a leisure travel market and is paying higher fares then business/commerce markets Spokane and Missoula.

A further illustration of Glacier Park’s high average fares is a comparison to average fares in Northwest Region markets with similar or larger catchment areas

. Glacier Park has the second highest fare in the group and is argumentatively the most leisure travel oriented market of the group, which further compounds the impact of being ranked second.

In summary, Glacier Park is one of the highest average fare markets in the northwestern U.S. On
a smalle r scale this is as if Orlando had the highest average fare in the southeast U.S.



### Average One

- Way Fares at Northwest Region Airports With Catchment Areas of 150,000+
12 Months ended 3/31/2010

$0 $50 $100 $150 $200 $250 $300 Idaho Falls

Glacier Park

Great Falls

Pasco

Bozeman

Missoula
Billings
Eugene

Medford

Portland

Seattle

Boise
Spokane $199
$197
$195
$185
$184
$183
$166
$160
$151
$150
$149
$136
$136Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 16 

# Glacier Park Domestic Traffic by Region

There is a strong western orientation to Glacier Park domestic traffic. Over 45% of the Airport’s domestic traffic is exchanged with airports in the western U.S., specifically Arizona, Nevada, California, Oregon, Washington, Alaska and Hawaii (blue shared area below)

.

Glacier Park exchanged some 43,100 O&D (59 PDEW) with California alone in the twelve months
ended 3/31/2010. This is more traffic exchange than with any other region except the northeast and far and away more than with any other state.

Region O&D Traffic Percent Total Northeast 45,370 15.0% Southeast 35,600 11.8% South Central 20,870 6.9% Midwest 38,170 12.6% Intermountain 24,990 8.3% Far West 137,040 45.4% 12 months ended 3/31/2010

GLACIER PARK DOMESTIC TRAFFIC BY REGIONGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 17 

# Alternative Airports

Air service airports in the Glacier Park region include; Missoula 125 miles and 2:15 drive time to the south, Gre at Falls 234 miles and 3:39 drive time to the east and Spokane 254 miles and 4:21
drive time to the west.

Alternate Airports Near Glacier Park International

Despite significant distances and mountainous roads Glacier Park International Airport does suffer leakage of traffic to other airports. As was illustrated in the average fare section above Spokane average fares are some 56% lower than at Glacier Park (excluding Allegiant Air service to Las Vegas) and thus would present a strong temp tation in many cases to Glacier Park tourism visitors who intend to rent a car in any case. Glacier Park average fares are some 7% higher than
at Missoula as well. FCA

MSO GTF GEG



## Alternate AirportsGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 18 

# Traffic Leakage

The Kalispell market is relatively isolated and not on the Interstate Highway system. Yet significant air traffic demand leaks from Kalispell to surrounding airports, specifically Missoula and Spokane.

Although the Glacier Park International Airport catchmen t area represents a large proportion of the population of the larger region, the Airport does not retain the number of passengers equal to its share of the regional population. In other words, the Airport is leaking a large percentage of its passengers to other airports

– even when those airports are not particularly close.

The Kalispell

- Whitefish

- Columbia Falls m icropolitan statistical area had a population of over 8 9,624 in 2009

. The larger region comprised of the MSAs of Kalispell plus Great Falls, Missoula and Spokane has 2009 population of 749,109.

Kalispell’s share of the regional population is 12.0 %, while Spokane has the largest share of the regional population, with 62. 6 %.

In theory an Airport draws a number of passengers proportional to its overall population in the region. If that were to be the case in the Kalispell market, one could reasonably expect the Airport to retain about 12% of the total passengers using all four airports in the larger region. However, in the case of Kalispell, Glacier Park International Airport retains only 7.8% of the region’s O&D traffic.

.

This implies leakage of 4.2% of traffic or in this case 163,223 annual O&D or a leakage rate of
35. 1% for Glacier Park. T he largest beneficiary of Kalispell’s passenger leakage is Spokane , which we have already noted has average one way fares some 56% lower than at Glacier Park. 

### MSA Population O&D Traffic Traffic Gap Implied Leakage Market 2009 % Total 2009 % Total Leakage O&D Leakage Percent Glacier Park 89,624 12.0% 301,940 7.8% -4.2% 163,223 -35.1% Great Falls 82,178 11.0% 273,210 7.0% -3.9% 153,190 -36.0% Missoula 108,623 14.5% 521,770 13.5% -1.0% 40,302 -7.1% Spokane 468,684 62.6% 2,779,440 71.7% 9.1% -352,839 12.7%

Total 749,109 3,876,360 

## GLACIER PARK LEAKAGE: POPULATION VS O&D TRAFFICGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 19 Another way of determining passenger leakage from the Kalispell market to other airports in the region is by comparing the economy of Kalispell to the economies of the nearest three cities with commercially

- served airports. The easiest way to gauge each catchment area’s contribution to the economy of the region is to compare th e gross metropolitan products (GMP) of each. A GMP is much like a gross national product

– an overall gauge of economic activity in
an area in dollars earned.

The United States Council of Mayors reports the Kalispell

- Whitefish

- Columbia Falls metro are a produced a GMP of $3. 5 billion in 200 9 , which represented 12. 3 % of the total gross regional product (GRP) of the area including Spokane, Missoula, and Great Falls. Spokane generated the largest portion of the GRP, with $1 7.5 billion, or 61. 6 %, while Mis soula produced a GMP of $4. 6
billion

– good for 16. 2 % of the GRP.

Using this method of measurement Glacier Park’s implied leakage is nearly 175,000 annual O&D or 36.7% of traffic demand suggested by Gross Metropolitan Product.

Regardless of method of measurement the evidence is clear and consistent that Glacier Park does not generate O&D traffic in proportion to either its population or economic generation. 

### GMP 2009 O&D Traffic Traffic Gap Implied Leakage Market In Billions % Total 2009 % Total Leakage O&D Leakage Percent Glacier Park 3.5 12.3% 301,940 7.8% -4.5% 174,924 -36.7% Great Falls 2.8 9.9% 273,210 7.0% -2.8% 110,550 -28.8% Missoula 4.6 16.2% 521,770 13.5% -2.7% 106,200 -16.9% Spokane 17.5 61.6% 2,779,440 71.7% 10.1% -391,602 16.4%

Total 28.4 3,876,360 

## GLACIER PARK LEAKAGE: GROSS METROPOLITAN PRODUCT VS O&D TRAFFICGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 20 

# Air Service Needs and Deficiencies

The Kalispell region is among the most isolated in the lower 48 of the United States, being a two hour drive from an Interstate Highway , a two hour drive from the nearest alternative airport and over a four hour drive from the nearest airport with low fare air service. Furthermore, the major population cen ters of the United States are hundreds or thousands of miles from the region. Thus air service becomes an even more critical factor for supporting economic health and growth.

Compounding this isolation is the fact that the Glacier Park market has the seco nd highest domestic average fare paid of all airports of similar or larger catchment area in the northwest
U.S. The Glacier Park market has this high average fare despite a significant tourism/leisure travel component. Passengers traveling on vacation gene rally buy tickets far in advance and stay
over a weekend
, thus qualifying for low price points. The northwest region airports that Glacier Park is compared to all have more business travel demand than does Glacier Park. Thus, in
effect Glacier Park is a le isure market paying business market type average fares.

Glacier Park’s current air service is oriented toward the south and east while the largest portion
of its traffic demand (45%) is to the west. The merger of Delta Air Lines and Northwest Airlines has also reduced competition at Glacier Park. Effectively Glacier Park lost an airline, even though so far the merged carrier has retained service to all hubs flown prior to the merger. The loss of an airline, in terms of the dynamics of market price competit ion, is significant and is highly likely to lead to even higher fares in the future tha n are being paid now.

These market air service deficiencies are compromising the economic health and growth prospects for Kalispell and the entire Flathead Valley region. This is particularly true for the tourism industry of the region, which accounts for more than a third of regional economic activity. While
the r egion’s backpacking, fishing, boating, hunting and a host of other activities are known and renowned nationally and worldwide, a lack of good air service access and reasonable airfare pricing is hampering the region’s ability to compete with other, more ea sily accessible, wilderness venues in nearby states. This is especially true in these times of consumer austerity, when vacation dollars are both less available and consumers are seeking value for them.

Limited air service access, especially to the west, is also harming local efforts to recruit new business and industry from higher cost of living areas like California.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 21 The Need to Improve Westbound Access

The Glacier Park market is a paradox. Almost two thirds of airline seats that arrive and depart Glacier Park International Airport are east or south bound. Only about one third of market seats
are to or from westbound destinations.

Yet 45% of Glacier Park O&D traffic is exchanged with markets to the we st. A startling 15% of total Glacier Park O&D traffic is exchanged with California markets alone , yet Glacier Park has no nonstop service to any California city. Seven of the top twenty Glacier Park domestic
destinations are in California.

San Francisco i s the perfect California gateway for Glacier Park. San Francisco ranks as Glacier Park’s ninth largest O&D market and the Bay Area, when San Francisco, Oakland and San Jose are combined, is Glacier Park’s fifth largest O&D market.

The United Airlines hub at San Francisco offers nonstop service to a total of 50 domestic and international markets, 2 0 in California, 15 other domestic destinations, four each in Mexico and
Hawaii , two in Europe and five in Asia.

The O&D traffic demand between Glacier Park and California clearly illustrates that the Kalispell region has significant leisure and business communities of interest with California. San Francisco is the closest major city in California to Glacier Park and the United Airlines hub operation at San
Franc isco is the largest network carrier hub in the state.

The Need to Rebalance Glacier Park Market Competition

Prior to the Delta Air Lines / Northwest Airlines merger Glacier Park had five airlines offering service, including four network carriers.

The merger effectively cost Glacier Park a competitor. While the newly merged Delta has not, as of yet, cut service to any hub previously flown by the two airlines, the Glacier Park market has lost for certain one price competitor. Instead of four network carriers pricing competitively in the market there are now are three. Furthermore both Alaska/Horizon and United face limitations to their ability to fully compete in the Glacier Park market. Alaska/ Horizon’s hub is Seattle, nearly 400 miles directly west of Glacier Park. Because of this Alaska/Horizon is hard pressed to offerGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 22 competitive connections and pricing to many cities beyond the west coast. United service is year round to Denver and summer season to Chicago and thus this carrier is hard pressed, a gain by hub location and routing circuity, to offer effective competition to western destinations. The shifts in Glacier Park market share due to the Delta/Northwest merger are clear.

Delta now has clear market dominance and the hub location limitations of competitors mean that Delta often only has on e real competitor on many routes. 

## Delta 35 %

Northwest 17 % Alaska

24 % United

15 % Allegiant 9 % 

# Glacier Park Market Share 2009

Delta 51%

Alaska

24 % United

16% Allegiant 9 % 

# Glacier Park Market Share 2010Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 23 Strengthening the smallest carrier, by market share, is the best way to rebalance the competition at Glacier Park. United has been successful operating Denver and (seasonal) Chicago service. The addition of San Francisco would give the carrier a much greater footprint in the market, more internal flexibility in terms of capacity allocations and schedule timing and the ability to more effectively compete for western market traffic.

Nonstop service between Glacier Park and San Francisco would help address all of the market’s current deficiencies; lack of westbound access in proportion to traffic demand, the second highest average fares in the region despite being a p rimarily leisure market, and the market share consolidation issues and diminishing of competition that has resulted from the Delta/Northwest merger.


# Glacier Park International Airport Previous Grant Award

In August of 2006 the Department awarded Glacier Park a $450,000 Small Community Air Service Development Grant. The goal of the 2006 grant was to bring new air service to Kalispell, specifically United Airlines service from Denver.

Glacier Park is proud of the success of the 2006 Grant. United began Gla cier Park service in 2007 and that service continues to operate profitably today. As a result of the market toehold the Denver flights have gained for United the carrier has successfully experimented with summer season Chicago service in recent years.

The 2006 Grant was closed on June 1, 2009 and 100 % of the DOT and local match funding was used to support the successful startup of the United Denver service. Clearly Glacier Park International Airport, the Kalispell region and the entire Flathead Valley do s upport new air service and the airport and surrounding communities have demonstrated they know how to successfully use precious Air Service Development Grant dollars effectively.

It is specifically because of the success of the first Grant that Glacier Pa rk now files this application for a new, second grant. The first Grant was specifically for Denver, a hub southeast of Glacier Park that improves east and south connections. This new Grant application is to improve westbound service via San Francisco. We f irmly believe that United service to San Francisco will work as well or better than the Grant supported Denver service.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 24 

# Local Air Service Development Efforts

Since at least 1998 Glacier Park International Airport has been involved in aggressive air s ervice development efforts. During that year Glacier Park International Airport retained the services of Sixel Consulting Group to help recruit Northwest Airlines to serve the Flathead Valley year round (at that time they provided only seasonal service).

In 2001, Glacier Park International Airport first approached United Airlines regarding service to
Denver. The events of 9/11 and United’s subsequent bankruptcy led to putting that partnership
on hold.

In early 2003 Glacier Park International Airport visited America West Airlines in Phoenix to propose service to Phoenix. The Airport proposed seasonal Airbus service to America West. Beginning in June 2003 America West began year round regional jet service to the Flathead Valley with one flight per day . Following the summer of 2004 America West discontinued service. They returned in the summer of 2005 but left the market after the merger with US Airways.

In 2006, Glacier Park International Airport was able to recruit United Airlines service to Denver
, aided greatly by a Department Grant

. United’s successful Denver route has allowed the carrier to operate seasonal summer Chicago service.

In 2008, the Airport recruited Allegiant Air to begin twice

- weekly service to Las Vegas. That service has perfor med well in its first two year s of service.

The Airport remains in close and regular contact with its incumbent airlines. The Airport has attended each of the Allegiant Air annual February conferences at that carrier’s headquarters city of Las Vegas. At l east once per year but often twice or more the Airport has either a
conference call with each of its incumbent network carriers or makes a visit to each carrier’s headquarters. The Airport also attends either the Network or Jumpstart Conference each year.

In November of 2009 Glacier Park presented a market briefing document to Frontier Airlines at its headquarters in Denver. The Airport has followed up this meeting with additional market
information transmissions to Frontier.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 25 

# Detailed Explanation of Prop osal

The Glacier Park market is very isolated and air service dependent, has the second highest fares of any airport in its peer group in the Northwest Region, suffers from a competitive imbalance post Delta/Northwest merger and has the majority of its air service headed east and south while
45% of its traffic is westbound.

The Airpo rt proposes to offer G rant funding , marketing support and revenue guarantees to a United Express carrier for daily flights to the San Francisco hub

.

This will, in some form , address all of the market service issues listed above.

 Additional capacity will discipline pricing, if not lead to lower fares in some markets

.

 United has the smallest traffic share in the market, enabling that carrier to add capacity
and link the market to its large west coast hub will strengthen the carrier service footprint and add a third carrier to the pricing equation in many west coast markets.

 This service will, at long last, give Glacier Park nonstop service to California and
additional ca pacity to the west, where 45% of its traffic exchanged.

 Enabling United to add a route to its powerful San Francisco hub will redress the market share imbalance that has occurred post Delta/Northwest merger.

This new route can be started up very efficient ly because United already has operating
infrastructure at Glacier Park.

This new route can be operated very efficiently, in tune with seasonal traffic demand fluctuations, because United accesses the Glacier Park market year round from its Denver hub
and less than daily off peak service can be complimented by connection service via Denver. At the same time, United will have the flexibility to add capacity during peak summer and winter travel periods, especially on weekends when leisure travel demand for Gl acier Park is highest and some business routes at the San Francisco hub are operated at reduced frequency.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 26 Glacier Park to San Francisco is 844 miles and the Airport believes that Untied would typically operate the route with a 50 seat regional jet, alth ough larger equipment could be substituted during peak periods.

The operational statistics summary assumes an average of one daily round trip, however
, t he carrier may operate tw o flights per day at peak periods like on weekends in peak summer or peak winter. At the same time service may be reduced to less than daily during should periods like November or May.



### Distance 844 Block Time 2.5 Annual Segments 716 Annual Block Hours 1,790.0 Annual Seats 35,800 ASM 25,632,800 Estimated CASM 0.19 Estimated Annual Op Cost $4,870,232 Estimated Cost/Hour $2,721 

## OPERATIONAL STATISTICS: FCA - SFOGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 27 San Francisco is Glacier Park’s ninth largest O&D destination and the combined Bay Area of San Francisco, Oakland and San Jose is Glacier Park’s fifth largest O&D destination. Nonstop service would stimulate those numbers significantly.

The United Airlines hub at San Francisco offers to Glacier Park online connection service to a
total of 50 domestic and international markets ; 20 in Califor nia, 15 other domestic destinations, four each in Mexico and Hawaii, two in Europe and five in Asia.

Connections Available Beyond the United Airlines San Francisco Hub

Glacier Park

– San Francisco service would be a perfect complement to existing United service to Denver and during the summer season to Chicago. It would “bulk up” United’s market footprint in the market by giving it the ability to more effectively compet e for traffic to the west. United also has a significant international service pattern at San Francisco, including nonstop flights to five Asian cities, four Mexican cities and two European capitals.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 28 First Year Traffic and Revenue Forecast

United Express regional jet service is estimated to generate 28,308 onboard O&D the first year of operation.

2011 UA Share United United United United Segment Destination YR 10Q1 Avg Fare Traffic Via SFO Traffic Avg Fare Ancillary Revenue Revenue SFO 7,110 $177.41 SJC 5,030 $186.76 OAK 4,690 $178.38 Bay Total 16,830 $180.47 25,245 55% 13,885 $177 $14 $2,457,615 $2,457,615

EWR 6,410 $209.64 6,731 5% 337 $201 $7 $67,734 $27,094 BOS 4,520 $230.45 4,746 5% 237 $221 $7 $52,505 $21,002 PHL 3,620 $270.51 3,801 5% 190 $260 $7 $49,361 $19,744 IAD 2,820 $276.27 2,961 5% 148 $265 $7 $39,273 $15,709 BWI 2,450 $240.60 2,573 5% 129 $231 $7 $29,716 $11,887 JFK 2,040 $265.49 2,142 5% 107 $255 $7 $27,304 $10,921 MCO 5,050 $217.81 5,303 5% 265 $209 $7 $55,444 $22,178 DFW 7,700 $252.23 8,085 5% 404 $242 $7 $97,892 $39,157 IAH 5,000 $218.35 5,250 5% 263 $210 $7 $55,031 $22,012 AUS 2,070 $237.97 2,174 5% 109 $228 $7 $24,834 $9,934 SAT 1,550 $273.02 1,628 5% 81 $262 $7 $21,335 $8,534 DEN 12,020 $223.62 12,621 3% 379 $215 $7 $81,289 $32,516 ABQ 1,540 $257.36 1,617 5% 81 $247 $7 $19,982 $7,993 LAS 32,740 $82.31 34,377 5% 1,719 $79 $7 $135,826 $81,496 LAX 7,550 $186.86 7,928 15% 1,189 $179 $7 $213,319 $127,991 PHX 6,660 $197.23 6,993 15% 1,049 $189 $7 $198,616 $119,170 SAN 6,190 $196.21 6,500 15% 975 $188 $7 $183,645 $110,187 SMF 4,750 $184.84 4,988 15% 748 $177 $7 $132,759 $79,655 SNA 4,730 $174.53 4,967 15% 745 $168 $7 $124,827 $74,896 ONT 2,410 $228.02 2,531 15% 380 $219 $7 $83,096 $49,857 BUR 2,000 $177.04 2,100 15% 315 $170 $7 $53,544 $32,126 HNL 1,990 $270.80 2,090 15% 313 $260 $7 $81,487 $48,892 RNO 1,590 $165.41 1,670 15% 250 $159 $7 $39,773 $23,864 LGB 1,530 $195.52 1,607 5% 80 $188 $7 $15,084 $9,050 TUS 1,530 $220.08 1,607 15% 241 $211 $7 $50,919 $30,552 OGG 1,380 $280.12 1,449 15% 217 $269 $7 $58,456 $35,073 PSP 1,330 $172.53 1,397 15% 209 $166 $7 $34,702 $20,821 FAT 1,090 $212.72 1,145 15% 172 $204 $7 $35,065 $21,039 SBA 1,020 $205.44 1,071 15% 161 $197 $7 $31,691 $19,014 KOA 910 $260.32 956 15% 143 $250 $7 $35,825 $21,495 LIH 670 $256.67 704 15% 106 $246 $7 $26,009 $15,605 BFL 150 $303.67 158 50% 79 $292 $7 $22,964 $13,779 MRY 130 $147.08 137 33% 45 $141 $7 $6,367 $3,820 RDD 120 $146.25 126 50% 63 $140 $7 $8,852 $5,311 ACV 110 $162.91 116 50% 58 $156 $7 $9,039 $5,423 SBP 70 $323.86 74 50% 37 $311 $7 $11,433 $6,860 Total 154,270 161,984 25,908 $4,672,615 $3,662,274 Asia 900 $762 $21 $685,821 $274,328 Mexico 900 $298 $14 $268,214 $88,511 Europe 600 $775 $21 $465,021 $186,008 Total Traffic 28,308 $6,091,671 $4,211,122 Projected Traffic & Fare With United Service 

# FCA - SFO TRAFFIC & REVENUE

Current Traffic & FareGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 29 The new service will generate an estimated $6.4 million in total revenue for United, an estimated $4.2 million of which would be credited to the local segment Glacier Park

– San Francisco.

A modest $ 402
, 782 first full year operating loss is projected. This is a 9 % negative margin and a reasonable first year outcome. The operating loss per new passenger generated is $ 14

. 22

.

The forecast passengers on the new service would pay approximately 4% less than the average fare paid in each city pair for the 12 months ended 3/31/2010. This is actually an assumption of significant average fare paid savings because the baseline average fare is from a 12 month period in 2009 and early 2010 when industry average fares were very depressed and the new service traffic would travel in 2011 and 2012. Were it not for the new service average fares paid in that period would be significantly higher due to normal economic recovery and normal
inflation.

Load factor on the new route would be 79.1% in the first year, assuming use of a 50 seat RJ on all flights. Second year load factors, due to normal market growth and increased market traction
for the service, will climb into the mid 80% range. Combined with modest average fare growth the service should break even or make a profit in year two. 

### Traffic 28,308 Seats 35,800 Load Factor 79.1% Estimated Annual Op Cost $4,613,904 Estimated First Year Segment Revenue $4,211,122

Estimated First Year Operating Loss $402,782 

## NEW SERVICE SUMMARY FCA - SFOGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 30 

# Extenuating Factors Affecting Glacier Park Air Service

The Kalispell region is one of the most isolated in the lower 48 of the United States. The nearest Interstate Highway is two hours drive distant. Th ese fact s separate the Glacier Park Grant request from most others wherein the application does have relativ ely close access to other air service.

Isolation magnifies the importance of good air service, both in terms of flights and routes and in terms of reasonable airfare pricing.

Since both Northwest and Delta were major air service providers at Glacier Pak, the merger of those two airlines has significantly impacted the competitive balance of the market.

The imbalance between service and traffic demand at Glacier Park is unusual as well. Where as a majority of Glacier Park air service is to hubs to the east and south, the largest portion of Glacier Park traffic demand (45%) is to cities to the west. California, by itself, generates 15% of total Glacier Park domestic traffic demand, yet Glacier Park has no nonstop service to that
state.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 31 

# A Strategic Plan for Success

Building on the Successful First Grant

Glacier Park International Airport was able to recruit United Airlines service to Denver, starting in 2007, with the help of a Small Community Grant. A total of $ 500,000 in Grant funding and matching funds was expended in the initial startup phase of this new service. United has retained the Denver service after Grant funding ended. Because of the Grant supported Denver
service United also has added and retained summer se asonal Chicago service. Over 107,000 O&D passengers have flown on United Airlines in or out of Glacier Park in the period supported by the Grant. This equated to a Grant funding cost per passenger of $ 4.67

.

Now the Glacier Park International Airport and its local partners want to build on the success, the knowledge and the platform of the first Grant with this Grant Application.

The first Grant was a great success, precisely the type of success the Small Community Air Service Development Grant program wa s designed to create. In addition to the new air service and passengers the first Grant generated, consider for a moment where the Glacier Park market would be today without United Airlines. The Delta/Northwest merger would have reduced
market network carr ier air service to just Delta service south and east and Alaska/Horizon service west. Glacier Park’s already high airfares would no doubt be even higher.

As this document has shown, there is more work to be done to address Glacier Park’s air service
defic iencies. Average fares remain higher than at peer airports in the region, the Delta/Northwest merger has reduced competition and current service is weighted east and south while traffic demand is weighted west. And all this in an isolated market much more reliant on air service for economic health than the average U.S. city where freeways and alternative air services are easy to reach.

Glacier Park knows how to successfully recruit, introduce and support new air service. In these
difficult economic times a irlines, especially network carriers, are hesitant to start new air service without some form of financial backup during the startup phase of service. Glacier Park believes that award of this second Grant will be the backstop that United needs to begin San Francisco service and that this service will significantly address current air service deficiencies.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 32 

# Public / Private Partnerships

A number of local partners will be working with Glacier Park International Airport to promote and market the new service. Contacts will be made to all regional members of chambers of commerce and similar organizations, and those with an interest in growing the econom ic base of the community through local business growth, attraction of new businesses and the promotion of tourism and visitor traffic via the airport.

Mon tana West Economic Development and t he Flathead Port Authority Montana West Economic Development a nd the Fla thead Economic Development Port Authority’s objective is to grow job opportunities in Northwest Montana. These organizations work hand in hand to help local businesses expand and to attract appropriate new businesses to the valley. They work to b uild the reputation of the area as a desirable place to do business through strategic marketing and communications.

All services are provided at no cost and include information on demographics, workforce and labor trends, sites and facilities, financing options, logistics and local service providers. In addition they support a local Technology Roundtable and various special events aimed at promoting positive economic development activities.

Kalispell Area Chamber of Commerce
The Kalispell Area Chamber of Commerce is a business and professional association consisting of 700 members. These members employ over half of the private workforce in Flathead County. Founded in 1905, the mission of the Kalispell Area Chamber of Commerce is to enhance the community and business environment of the Flathead Valley.

The Chamber provides numerous services to help meet those goals including: business start up and expansion assistance, public policy development and advocacy, business promotion an d public relations, community leadership development, business networking and marketing, workforce training and development, and the creation and dissemination of business and
economic data and research.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 33 Montana Department of Commerce Regional Developme nt Office

The RDO's are a resource to businesses, local development corporations, and communities in the area. The program serves as an access point to relevant Commerce Department resources, and all other relevant business and community development resources.

The mission of the Reg ional Development Officer is to insure that all areas of Montana have reasonably equal access to funding and resources; develop close and effective working relationships with businesses, city and county governments, and local economic de velopment agencies (EDCs); work closely with the Governor’s Office of Economic Opportunity with its economic development activities; assist the Commerce programs with efforts to maximize leverage of other funds; help businesses create higher paying and sus tainable jobs; and provide access to information and programs about other state and federal programs. The RDO is the key conduit between expanding Montana businesses seeking financing through business loan programs such as Community Development. Block Gran t (CDBG), Montana Board of Investments (MTBOI) and others.



# Air Service Advisory Groups

Glacier Park International Airport has established an Air Service Advisory Group to help recruit new service and support incumbent airlines. The Group consists of th e Glacier Park International Airport, Mon tana West Economic Development and t he Flathead Port Authority , the Kalispell Area Chamber of Commerce, Whitefish Partners, and the Montana Department of CommerceGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 34 

# Grant Funding

Grant Funding Allocation

The Glacier Park International Airport is requesting $500,000 in Small Community Air Service Development Grant funding. Glacier Park would match this Grand funding with $50,000 of local,

non

- airport funding. The local match funding would be community generate d funding, it would be new funding and strictly for the purpose of supporting the Grant objectives in concert with the Federal funding.

Marketing and Advertising

Glacier Park International Airport proposes to spend $5 0 ,000 in funds on marketing and advertising promot ions in support of new service

. The Airport would work closely with United Airlines on the exact spending pattern for this funding.

Some portion would be spent in the Glacier Park catchment area, where fortunately media
costs are relati vely low. The Airport would work closely with United to ensure that all marketing and promotional efforts are consistent with United Airlines marketing and promotional schemes and protocols.

Some portion may also be spent in concert with the various entit ies that promote Kalispell area tourism in out of state venues. The Airport will work closely to ensure that new San Francisco service is featured in locally generated tourism promotions that run routinely in California and
southwestern U.S. cities.

All m arketing and promotional plans will be forwarded to the Department and the Glacier Park International Airport will include in its timely quarterly Grant Status reports to the Department complete details on marketing and promotional efforts. 

### Allocation Percent DOT Share Glacier Park Share Service Risk Abatement $500,000 90.9% $454,500 $45,500 Marketing & Promotion $50,000 9.1% $45,500 $4,500 Total $550,000 $500,000 $50,000 

## GRANT FUNDING BREAKDOWNGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 35 Start

- up Expens es

Whereas normally an Airport may offer to assist new air service by helping to defray startup costs this will not be necessary in the case of this Grant application since Untied Airlines service is already established at Glacier Park.

Revenue Guarantee

The Airport proposes to make available at least $5 0 0 ,000 in funds for a revenue guarantee to the new carrier, to cover start

- up losses that may occur during the first twelve months of service. Subject to negotiation, payments will be made to the new carrier quarterly, when income derived from passengers an d cargo is less than the agreed upon target revenue per flight. In quarters where r evenue generated exceeds the target revenue the Airport will seek, in negotiations with the carrier, to have that surplus credited against any shortfalls in other quarters

c overed by the revenue guarantee agreement.

Any revenue guarantee agreement between Glacier Park and an airline for this new service will be sent to the Department for review and approval prior to being implemented.

Additional Costs

As part of this pro gram, the Airport understands that additional expenses might be incurred,
such as possible expenses related to meeting with United Airlines or one of its affiliated regional partners to negotiate a commitment for the new service. The Airport does not antic ipate these expenses to be significant.


# Target Audience and Marketing Plan

The target audience for the new service this Grant would create consists of both local residents of the Flathead Valley region and visitors to that region.

For local residents both business and leisure air travel needs will be met by the new service. The need for more airfare competition at Glacier Park has been noted earlier in this document. The glaring need for more nonstop service to the west and specific ally for the first nonstop service toGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 36 California is clear. Current air travel demand patterns clearly establish significant business and leisure communities of interest between the Kalispell region and California.

The marketing of the new service in the F lathead Valley region will be coordinated with United Airlines and its regional partner that begins the new service. While final decisions on the nature and focus of this marketing effort will be subject to agreement with the carrier, Glacier Park anticipa tes an aggressive multimedia effort aimed at establishing in the minds of area residents that there is now nonstop service to California.

This broad message will be conveyed via low cost bill boards and radio spots and radio promotions featuring, for exam ple, a San Francisco ticket giveaway to radio listeners.

A more focused message on new service to California will be conveyed at low cost via the various Chamber and Economic Development entities that are party to this Grant Application, using email and p ostal mail, as well as visits to Chamber and Economic Development Group meetings.

The overall goal is to ensure that every Flathead Valley resident that has business or leisure travel interest related to western destinations and especially California will be exposed to the news of the new air service multiple times in the first six months the service operates.

Regarding inbound tourists and leisure activity visitors, the Airport and its partners in the Grant will work closely with the Airline and with loc al resorts and Resort associations to ensure that all routine marketing efforts aimed at visitors, especially from California, mention the new air service. Where appropriate and cost effective the Airport will allocate Grant marketing funding
to assist lei sure/vacation visitor marketing efforts undertaken by local resorts, Chamber Groups or regional or state entities.

Local resorts will include information about the new air service in their own marketing efforts to previous visitors from California

.

The o verall goal is to ensure that a broad swath of the vast potential vacation and visitor population in the west and southwest has some exposure to the news of new nonstop service from San Francisco directly to Glacier Park, that gateway to northwest Montana.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 37 Whitefish Partners, The Kalispell Chamber of Commerce, Flathead Convention and Visitors Bureau, Flathead County Economic Development Authority and Montana West Economic Authority all have agreed to feature the new United Express service to/from San Francisco in all of their promotional material, newsletters, contacts with members and at trade shows, conventions, etc. The value of this in

- kind service is undeterminable.


# Timeline, Milestones and Monitoring

The timeline for the implementation of new air service proposed in this Grant application is driven by one key variable. That is the date of award. Should Glacier Park be awarded this Grant the date of award may have a material effect on the ability of United Airlines or one of its regional partner s to begin service by summer 2011. Network carrier route planning and capacity allocations are done far in advance. Glacier Park does not know if a Grant award date may still permit United or one of its regional partners to fit Glacier Park

– San Francisco service into the summer of 2011 capacity, route and schedule plan. For purposes of this timeline we will assume that a Grant award would be in time for carrier response in the summer of 2011.



## GLACIER PARK GRANT TIMELINE WITH MILESTONES
Date Event Status Aug, 2010 Grant Application Done Sept, 2010 Letters of support

Q4 2010 Receive Grant Award Jan, 2011 Follow up meetings with United or its regional partner Q1 2011 Air service agreement with United or partner Q1 2011 Announce service Q1 2011 Begin quarterly DOT Grant status reports Q1 2011 Hold community meetings with key travel generators Q2 2011 Begin advertising 60 to 90 days prior to first flight Q2 2011 New service kickoff Q2 2011 Evaluate first 30 days & booking curve Q2 2011 Based on initial booking curve firm up Fall 2011 off peak service Q3 2011 Refine marketing program based on route performance Q3 2011 Renew marketing program, targeting winter bookings Q4 2011 Work with carrier to firm up Winter service pattern Q1 2012 Evaluate first six months of service Q1 2012 Adjust marketing and service as needed

Indicates MilestoneGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 38 

# Performance Measures

The success of the program will be ba sed on three variables. The first measure of success will be
the re cruitment and retention of an airline to provide service to a new hub . When new service is initiated, the first measure of success will be met. The Airport will judge the second measure of success by the increased number of enplanements. Finally, the third measure of success will be based on how much average airfares in the community have gone down. The measurement of enplanements will include a monthly comparison, once the program begi ns, to past enplanements numbers. The measurement of airfares will be derived from US DOT OD1A reports.



# Financial Controls

As the sponsor, Glacier Park International Airport will be the responsible party for all fiscal matters and DOT reporting requirements. The group is established as an Airport Authority , which is a public governing body. As a public entity the DOT can be assured that proper financial controls are in place to guarantee that the DOT’s grant will be used in accordance with any subsequent agreement. The Airport understands that the grant is a reimbursable grant, meaning the Airport is responsible for program expenditures and will submit invoices to the DOT fo r reimbursement, based on a percentage of the total grant request.



# Return on Investment

The return on investment from the first Grant was huge, with over 107,000 United Airlines passengers using Glacier Park in the 2007

– 2009 period, for a cost per pass enger generated of less than $5.

For this Grant t he Airport will use the same cost effective and achievable strategy to add new service, increase enplanements, and lower airfares at the airport. The proposal uses proven methods of achieving air service i mprovements, allowing the DOT to be comfortable with choosing this proposal. The increased competition, and access to lower airfares with increased competition, by adding service on a new route , is in line with the major goals of the Small Community Air S ervice Development Program.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 39 

# Use of Department Funds

Glacier Park International Airport has developed this proposal as a one

- time grant. T he advertising and marketing program will commence a few months before service starts and last
for at least twelve months. The revenue guarantee program will also be in place for twelve
months

. It is projected that the service will be financially self

- sustaining within the second twelve
months of service.


# Route Self Sufficiency

The traffic, revenue and cost of o peration forecast included in this Grant application suggests a modest first year loss for new Glacier Park

– San Francisco service.

This forecast is consistent with most new service startups, it is highly unusual for new air service to be profitable from day one of operation. The modest level of the forecast first year loss and the “room to grow” in terms of load factor suggest second year results of breakeven or modest profitability. This analysis does not consider any economics of operating or market fo otprint scale
that United would achieve in the Glacier Park market from the addition of this service.

Should the service remain unprofitable in the second year the Glacier Park Airport and its partners will immediately work with the carrier to correct the shortfall. Steps to bring the new service to second year profitability include;

 Analysis of existing traffic flows to determine where market share capture objects are falling short of forecast or of known potential.

 Additional local marketing funds targ eted to identified market share capture shortfalls.

 Adjustments in second year and beyond capacity allocations to more accurately fit with traffic demand patterns established by the first year’s service.

 Additional “soft” incentives to the carrier from t he Airport and its partners.

 Block seat purchases from local resorts at negotiated rates to reduce carrier risk.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 40 

# Alternate Plan

If, for some unforeseen reason, service is not commenced in a timely manner by United Express on the San Francisco route, the Airport proposes to use federal grant money awarded under the Small Community Air Service Development Program to recruit service o n another westbound
route

. While this is unlikely, the airline industry is subject to great volatility and in the time span from Grant award to carrier agreement to service startup a great deal can happen. Witness the huge swing in the airline industry fr om Fall 2007 to Fall 2008 and all that happened in between in terms of fuel cost, traffic demand and revenue metrics.

Alternate options for service under this Grant would include United service to the Chicago O’Hare hub and/or Los Angeles, or Horizon Air /Alaska Airlines service to Portland and/or Los Angeles. Any alternative use of the funding will be subject to Department approval.


# Legal Sponsor

The Legal Sponsor of this Grant application is the Glacier Park International Airport. The designated Legal Sponsor contact is:

Cindi Martin Glacier Park International Airport Director 4170 Highway 2 East Kalispell, Montana 59901
Phone 406 257 5994
Fax 406 257 5960 Email cindi@glacierairport.comGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 41 

# G lacier Park International Airport Background

Glacier Park International Airport is a public airport serving Flathead County, Montana. It located six miles) northeast of the central b usiness district of Kalispell and also serves the towns of Evergreen, Columbia Falls, and Whitefish as well as Glacier National Park. The airport was originally built in 1942 under the name Flathead County Airport. For many years, passenger traffic
remained low. In 1970, the airport was designated for international traffic and changed to the
current name. Throughout the 1970s and 1980s, traffic picked up substantially, as Hughes Airwest, Western Airlines and Horizon Air offered flights. The terminal was upgraded in 1981, and
further major upgrades to the terminal, runways and other facilities occurred throughout the
1990s. Glacier Park International Airport now covers an area of 1,505 acres which contains two asphalt paved runways: 2/20 measuring 9,006 x 150 ft and 12/30 measuring 3 ,504 x 75 ft.

Glacier Park International Airport Aerial PhotoGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 42 

# Community Information

Flathead County is Montana’s third largest in terms of population, behind Yellowstone (Billings) and Missoula counties. The
estimated 200 9 MSA population of 8 9,624 does not count an additional 16,000 or so summer residents. The Flathead Valley and the Kalispell MSA are one of the fastest growing areas in the state of Montana and even rank high in terms of population growth in the nation. The MSA population has grow n 20% between 2000 and 2009. The MSA growth pattern is not new, Gallatin County population grew 34.4% from 1990 to 2000 and Flathead County had a population growth rate of 25.8% in the same period

.

Glacier Park International Airport serves the 132 ,0 3 0 r esidents located in four Montana counties; Flathead, Lincoln, Glacier and Lake (50%). In addition

, Glacier Park International Airport is the primary air transportation node for the estimated 2 million annual visitors to Glacier National Park
and Waterton Lakes National Park (Alberta). Flathead County is not only among one of the fastest growing counties in Mont ana, but in the nation as well.

What’s New in Kalispell

Kalispell is in the heart of the magnificent Rocky Mountains, poised in the northwest co rner of
Montana and about an hour south of the Canadian border. As Montana's seventh largest city and the seat of Flathead County, it is a progressive, thriving community; the ve ry essence of Big Sky Country with the best backyard in the country.

o Bizjournals compared 140 micropolitan areas in 20 statistical categories, using data from
the U.S. Census Bureau. A micro consists of a central community with 10,000 to 50,000 residents, along with the surrounding countryside. It is, in effect, a small

- sc ale version of a metropolitan area. Kalispell
, as the gateway to Glacier National Park , is one of the most scenic places in America. Entrepreneurial spirit runs high in Kalispell, which ranks sixth among all micros in percentage of self

- employed workers. Some quick stats on the area
include : Average commuting time: 18.9 minutes
, Median household income: $45,920
, Homeownership rate: 76.1%
, Median house value: $204,300
, Adults with bachelor's degrees: 25.3%Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 43 o U.S. News & World Report named Kalispell one of its 10 Best Outdoorsy Places to Retire if you like hiking, biking, or walking. Kalispell enjoys a four

- season climate, with January being the coldest month. Kalispell lies among northwestern Montana's towering mountains, lush valleys, and pristine lakes. Glacier National Park is just north of Kalispell. Kalispell is the regional trade center for northwest Montana, serving over 150,000. Mountain Sports and Living magazine once named Kalispell the "best
mountain town in America."

o The 100th ann iversary of one our nation’s most valuable treasures is being celebrated in 2010 . The story of Glacier National Park’s past, present, and future is one shared by many diverse cultures and people. The Centennial of Glacier National Park provides all America ns and the world a chance to increase our understanding of and dedication to the rich history and preservation of this pristine treasure. Centennial events and celebrations will be occurring throughout the year. Visitors worldwide will celebrate with the park and explore the possibilities it has to offer, with millions of acres of wild country to explore, the most intact ecosystem in the lower 48 states and the spectacular Going

- to

- the

- Sun
Road.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 44 Kalispell Economic Overview

Kalispell is the trade center of Northwest Montana, a dynamic, prosperous economy, where people travel to shop, receive
medical care and conduct business. The population of the trade area for Kalispell is
estimated to be 150,000 people , excluding
Canadian residents who might use the trade
zone from time to time

. Education, government, health services, forest products, manufacturing, engineering, tourism and retail thrive and balance the local economy. Flathead County is Montana's third most populous and second

- fastest growing.

Growth estimates project that by 2015 the county's population will reach 100,000 (NPA Data Services Inc.) The county is a montage of three distinctive incorporated cities, Kalispell, Whitefish and Columbia Falls, as well as several small towns. Kalispell, the county seat, is the state's seventh largest city with a population of 22,000 and a growth rate of 22 p ercent since the U.S. 2000

census

- its population is estimated to hit 25,000 by 2015. Greater Kalispell is home to over 34,000. Commercial development has reached epic proportions in the past few years. On Kalispell's
north side three

- quarter million sq uare feet of major retailers and restaurants have been built to keep pace with the area's booming real estate growth. In 2008 the city issued 7 permits for $4.26 million in commercial construction. An additional 32 permits were issued for another $37.5 mi llion
in 2007.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 45 The Flathead Valley’s Largest Employers
Kalispell Regional Medical Center 1,700 Plum Creek Timber Company 1,140 Semitool 700 Flathead Community College 689 TeleTech 500 Flathead County 456 Winter Sports, Inc. (Big Mountain Resort) 450 Workplace, Inc. 440 Glacier National Park 400 Columbia Falls School District 352 Wal

- Mart 350 Burlington Northern 300 LC Staffing 300 Immanuel Lutheran Home 270 North Valley Hospital 235 Flathead National Forest 207 Whitefish School District 200 Glacier Bancorp 185 National Flood Service 175 CenturyTel 160 Target 150 Grouse Mountain Lodge 145 Brendan House 140 C olumbia Falls Aluminum 140 Flathead Valley Co

- Op 140 Rocky Mountain Contractors 140

Source: Kalispell Chamber of Commerce

Kalispell Tourism

Kalispell and the Flathead Valley are a visitor and recreational paradise. The area plays host to eight golf courses within a 45 minute drive, two ski resorts, Glacier National Park, and Flathead
Lake. The Flathead boasts over 2
, 000 artists and craftsman in residence, and among the highest concentration of bronze casting foundri es in the nation. Outstanding arts and culture opportunities abound. In 209 the renowned Glacier Symphony and Chorale celebrate d its 25th anniversary. Kalispell has been recognized as the "Best Mountain Town in America" by Mountain Sports and Living mag azine. And, Glacier National Park has been rated the "Best Backcountry Park in America" by Backpacker magazine.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 46 Glacier National Park From downtown Kalispell, you can see the majestic, snowcapped peaks of magnificent Glacier National Park, with its diverse wildlife, awe

- inspiring glaciers, expansive valleys, cascading
waterfalls and a million acres of pristine wilderness, studded with 762 lakes, 563 streams or rivers and
175 named mountains

- six of which rise to over 10,000 feet.
Glacier National P ark is known as the “Crown of the Continent” with some of North America’s most stunning mountain vistas. The
most

- visited attraction in Glacier Park is the “Going to the Sun Road,” which traverses the mountain peaks above timberline, offering sweeping vis tas of the northern Rockies. Glacier Park
offers more than 700

- miles of trails, which link roughly 700

- mountain lakes, 37 glaciers, and access to more than 1,000

- species of plants. The Park is home to full

- time residents such as black bears, grizzly bear s, mountain goats, bighorn sheep, moose, and deer. In 1995, Glacier Park was named a World Heritage Site, joining such landmarks as the Taj Majal, the Galapagos Islands, and the Serengeti Plains.

Flathead National Forest

The more than 2.3 million acres o f the Flathead National Forest that dominate the Kalispell region make Northwest Montana a sportsman's paradise. The forest and adjacent undeveloped lands, including Glacier and Waterton National Parks, create a recreational Shangri

- La of nearly 10,000
sq uare miles and provide habitat for 250 species of wildlife including elk, moose, bighorn sheep, mountain goats, mountain lions, wolves and grizzly bears. More than 200 species of birds have been recorded in the Flathead. The lakes, rivers and wetlands pro vide refuge to waterfowl. Lacing the valley floor are miles of streams, creeks and sloughs

- perfect for slipping in your canoe or kayak. The Flathead River offers miles of great fishing for whitefish, cutthroat and rainbow trout. Recreationists enjoy raf ting and boating on 219 miles of the Wild and Scenic portions of its North, Middle and South forks

.Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 47 Whitefish
Whitefish is often referred to as Montana’s recreation and vacation capital

– with year round options for just about every sports enthusiast. I n the winter Whitefish Mountain Resort provides plenty of excitement and challenge for skiers
and boarders alike. Whitefish is also the center of fun in the warm seasons including water sports aplenty on 7

- mile long Whitefish Lake, mountain and road biking , hiking, river rafting, kayaking, amazing photo safari destinations, wildlife viewing and world class golf on two of the Valley’s 9 championship courses. Whitefish is famous for its great shopping and world class dining as well as comfortable and Montana Friendly lodging. Whitefish is one of the Rockies’ most

- visited tourist destinations .” Each year,
more than 2 million visit this corner of the Flathead Valley. Whitefish’s biggest draw is the world

famous Big Mountain Resort, which boasts being the closest mountain ski resort to a commercial airport (just 11 miles from GPI).Glacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 48 

# Summary

Glacier Park International Airport is an essential gateway to air service for a large area of the northern Rocky Mountains, home to 180,000 American and Canadian residents

. The Airport is also a gateway to a large and nationally and globally known wilderness area and all the
associated leisure activities.

The Glacier Park region is one of the most isolated in the nation, a two hour drive just to get to
th e Interstate Highway system and full day’s drive or even multi day’s drive to major population centers like Seattle, Denver and Minneapolis.

This isolation means air service is even more important than it is in the typical American city
where the Intersta te runs thru town and there is a selection of air service airports within a 90
minute drive.

Glacier Park air service is characterized by;

 High fares, the second highest among peer airports in the Northwest region

 Especially high air fares considering t hat Glacier Park is significantly a leisure destination market, akin to a northwestern version of a Florida resort community. Its peer airports in
the Northwest are much more business markets. This means Glacier Park leisure passengers are paying higher ai rfares than business travelers are some peer airports in the region.

 Market share concentration issues, the Delta/Northwest merger has cost Glacier Park an airline and left the merged Delta with over 50% market share.

 An imbalance between the existing se rvice pattern and traffic demand with a majority of existing air service going east and south and some 45% of traffic demand being to the west. A full 15% of Glacier Park traffic is exchanged with California but the Airport has no nonstop service to that s tate.

This Grant proposal is for improving westbound access. It is targeted for new United Airlines nonstop service to the United hub at San Francisco. This new service would help address all ofGlacier Park International Airport

– Small Community Air Service Development Grant

– August 2010 49 Glacier Park’s air service deficiencies noted above. It w ould bring average fares down, as any new route and capacity does. It would strengthen United’s service footprint in the Glacier Park market and help to balance out the loss of Northwest Airlines as a market competitor.

Finally it would rebalance Glacier Park’s air service pattern to be more in tune with its air travel demand by adding a western hub and a California hub.

The Airport won a previous Small Community Air Service Development Grant in 2006, for revenue guarantees in support of United service to Denver. That route is still flown today

– a true success story from the SCASD Grant Program. The Airport wishes to build on the success of that Grant with this proposal for assistance in recruiting badly need ed improved westbound access and
service.

Gl acier Park has demonstrated it supports new air service when it is installed. The challenges
Network carriers face in these volatile economic times means that risk abatement of new service startup is essential to recruiting new air service.

Glacier Park believes that United Airlines can be recruited to take the risk of starting new San Francisco service. That risk, however, has limits and the community must also take risk to support the startup phase of new service. The SCASDG Program is Kali spell’s best option for putting together a package of incentives and risk abatements to bring about San Francisco service.

The Glacier Park International Airport and its Public and Private Partners in this Grant application are committed to replicating th e success of the 2006 Grant.

Our air service needs and deficiencies are clear. The positive impact this Grant application
would have on those deficiencies is also clear.

We thank the Department for its consideration of this application and look forward t o repeating the success of the first Grant should the Department look favorably on this application.