# August 2, 2011

Funding to Support the Marketing of New Air Service at Northeast Florida Regional Sponsor: The Northeast Florida Regional Airport

Edward R. Wuellner, AAE, Executive Director Congressional Code: FL

- 07
Dun & Bradstreet Number: 14

- 664

- 2389
Tax Identification Number (EIN) 59

- 1163738 

# NORTHEAST FLORIDA REGIONAL AIRPORT St. Augustine, Florida
Proposal Under the Small Community Air Service Development Program Docket DOT

- OST

- 2011

- 0119Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 2

TABLE OF CONTENTS

Introductory Letter of Support 3 Summary Information

– Appendix C 4
Introduction 6
The Northeast Florida Regional Air Service Market 8

Location, Catchment and Air Service Airports 8
Northeast Florida Historic Air Service 8 Northeast Florida Domestic Average Fares 1 1
Northeast Florida Carrier Market Share 1 2
The First Air Service at Northeast Florida Regional Airport 1 3 Alternative Airports 1 4 Northeast Florida A ir Service Development Efforts 1 5
Air Service Needs and Deficiencies 1 7

Northeast Florida Airfares in comparison to other Florida leisure destinations 17 Northeast Florida Historic Average fares 18 Alternative Airports and traffic leakage 20
The Traffic and Economic impact that less

- than

- daily carrier service can have 21 Strategic Plan for New Air Service 2 4

A state of the art airport terminal facility 24 Complete and low cost ground handling 25 Local support via a Public Private Partnership 26 Aggressive recruitment of new air service 26 A plan for new air service using grant funding 2 6
Grant a pplication goals and objectives 2 7
G r a n t a p p l i c a t i o n T a r g e t A u d i e n c e 2 7 Implementation timeline 29 Funding plan 30
Performance measurements and financial controls 30
Routes self

- sufficiency 31 Examples of market pairs that grand funding would support 32 Legal Sponsor 32 Summary 34 

### Section Page NumberNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

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INTRODUCTORY LETTER OF SUPPORT

July 27, 2011 Ms. Aloha Ley Associate Director Office of Aviation Analysis U.S. Department of Transportation 8 th 

### Floor, Room W86

- 310 1200 New Jersey Avenue SE, Washington D.C. 20590

Dear Ms. Ley,

Reference: Docket DOT

- OST

- 2011

- 0119
The Northeast Florida Regional Airport has submitted to the Department an application for a 2011 Small Community Air Service Development (SCASD) Grant. The Airport’s application is for marketing funding to support new air service at the Northeast Florida Regional Airport.

Allegiant Air is considering service at this Airport. We believe the Airport may have potential to be a destination airport in the growing Allegiant Air system.

Availability of marketing and promotional funding is critical to the success of new Allegiant Air service. Award of a 2011 SCASD Grant to the Northeast Florida Regional Airport will give the airport additional marketing funds to support new air service and will aid Allegiant Air in its continuing analysis of the potential for the Airport to join t he Allegiant system.

We urge the Department to give the Northeast Florida Regional Airport application all possible favorable consideration. Please feel free to contact me with any questions, comments, or concerns.

Best regards,

E. Keith Hansen M anager, Airport Planning Allegiant AirNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 4

SUMMARY INFORMATION

– APPENDIX C

Small Community Air Service Development Program
Docket DOT

- OST

- 2011

- 0119



### 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, date of Grant: ________________________________ Expiration date of G rant: _______________________



### B. Public/Private Partnership

Public:
1. Northeast Florida Regional Airport, St. Augustine 2. City of St. Augustine 3. St. Johns County Tourism Development Council

Private:
1. Galaxy Aviation 2. Professional Golfers Association (PGA) 3. Ponte Vedra & Beaches Visitors and Convention Bureau 4. St. Johns County Economic Development Council



### C. Project Proposal

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

- Up Cost Offset First Service Study Secure Additional Service Other (Specify)Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

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D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instrument Approach
Localizer Other:



### E. Project Cost

1. Federal amount requested: $ 125 ,000
2. State cash financial contribution: $ 0
Local cash financial contribution:
3a. Airport cash funds: $ 25,000
3b. Non

- Airport cash funds: $ 10,000
3. Total local cash funds: $ 35,000
4. TOTAL CASH FUNDING: $ 160,000
In

- Kind Contribution:

a. Airport In

- Kind contribution: $ 0
b. Other In

- Kind contribution: $ 0
5. TOTAL IN

- KIND CONTRIBUTION: $ 0
6. TOTAL PROJECT COST: $ 0



### F. In

- Kind Contributions

For funds in lines 4 a (airport in

- kind contribution) and 4 b (other in

- kind contribution), please describe the source(s) of fund(s) for each.



### 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?

NoNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 6

INTRODUCTION

Northeast Florida stretches from the Georgia border along the Atlantic Coast south to nearly Daytona Beach and some 4 0 miles inland at any point. The six county area has a population of
over 1.4 million and contains well known metro areas such as Jacksonville and St. Augustine.

The area’s tourism attractions and venues are perhaps less known than those of some other
Flo rida areas but are

, nevertheless

, popular and annual local tourism visit days are measured in
the millions.

Currently the region has established air service at Jacksonville International, on the far north side of Jacksonville, and at Daytona Beach, some 1 5 miles south of the region’s southern boundary.

The bulk of the region’s population and almost its entire tourism related infrastructure is located south of downtown Jacksonville and north of Palm Coast with a center of gravity at St. Augustine. I f the airline industry were to come today , for the first time, to Northeast Florida, the first air service would certainly be at Northeast Florida Regional Airport , perfectly located to serve the entire region from one low

- cost facility.

The Northeast Flor ida Regional Airport is a unique aviation facility. It is convenient to the major highways of the area and features a well designed and ultra low

- cost airline terminal facility. On
the field are extensive aviation related industrial facilities that contrib ute significant rental income to the airport and thus lower the facility

- related cost burdens of scheduled air service.

The Airport briefly had scheduled air service in 2007 and 2008. SkyBus Airlines, a low cost start

- up carrier

, began Airbus A

- 319 flight s from Columbus, Ohio

, and then add ed Portsmouth, New Hampshire

, and Greenville/Spartanburg, South Carolina . During nine months of service Northeast Florida Regional was a traffic and revenue star in the fledgling SkyBus route system. Over 54,000 enplaneme nts and 108,000 O&D passengers used the Airport during the nine months that SkyBus provided service. But while Northeast Florida Regional was a success for SkyBus, the balance of the route system was not and the carrier ended all operations in late March o f 2008.

Thus the Airport and its surrounding communities know that air service at Northeast Florida Regional can generate significant traffic and economic benefit. For that reason the Airport andNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 7

its supporters have continued to work to recruit various ai rlines to consider the enormous potential of this market.

The Airport, in cooperation with one of its Fixed Based Operators, has developed a complete and low cost ground handling service package, including above and below wing and fuel

- into

plane service. This ground handling service package is available to any qualified airline and the
attractive rate structure is long term

. The Airport has in place today the infrastructure to handle several hundred thousand annual passengers with airport related costs we ll below those at Jacksonville or Daytona Beach.

For the year 2010 the average domestic air fare at Jacksonville and Daytona Beach was $146, measurably higher than the average fare at West Palm Beach, Sarasota, Tampa, Fort Myers, Fort
Lauderdale and Orlando. Northeast Florida competes wit h those other cities for tourism visitors and tourism dollars. Measurable disparities in the cost of airline travel have a direct effect on the ability of Northeast Florida area businesses that depend on tourism to compete for visitors.

As is detailed in this document

, the Northeast Florida Regional Airport has worked hard since 2007 to recruit air service. Several airlines have expressed interest and one low fare carrier ha s written a letter of support for this grant application. The airlines have consistently said, “We love the facility and cost structure,
how do we market this new airport as a destination to prospective Florida tourists?”

The Airport and its partners need marketing dollar s to aid prospective low fare airlines in effectively marketing the Northeast Florida Regional Airport a s a gateway to the magnificent
vacation infrastructure around it to Florida visitors. This Grant application requests $ 125,000 in Department funding matched by $ 10,000 in local non

- airport funds and $25,000 in local Airport
funds. The total of $ 1 60 ,000 will give the Airport the final tool it needs to successfully recruit new
low fare air service to Northeast Florida Regional. The new service will lower the cost of air travel to Northeast Florida, improve tourist access to the region and thus confer a significant local economic benefit. This modest Grant funding request is entirely cons istent with the purpose of the Grant Program and Department funds will enable new low fare service that will have a significant positive local economic impact. 

### “If the Airline Industry were to first come today to Northeast Florida, the first air service would certainly be at Northeast Florida Regional, perfectly located to serve the entire region from one low c ost

facility.”Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 8

THE NORTHEAST FLORIDA REGIONAL AIRPORT A IR SERVICE MARKET

Location
, Catchment Population and Air Service Airports

N ortheast Florida is defined as a r egion by the area from the Georgia state line along the Atlantic Ocean and extending some forty miles inland and running south to the northern fringe of the Dayton a Beach area. The region encompasses the six Florida counties of Nassau, Duval, Clay, St. Johns, Putnam and Flagler and those six counties (the map’s gray shaded area) have an estimated population of 1,439,421.

The m ap illustrates that air service in this area is concentrated at the Jacksonville airport, north of Jacksonville, and in the Orlando metro area, well south of the region.

The gap between the Jacksonville Airport, north of that metro area, and the Orlando International Airport is significant, with an estimated drive time of
2:51 minutes and a distance of 170 road miles.

Inside this gap only limited network carrier service exists at the Daytona Beach Airport

. At Sanford
there is limited less

- than

- daily service. The Northeast Florida Regional A irport at St. Augustine, with its low airport costs and convenience to Highway One
and Interstate I

- 9 5
, sits nearly at the center of local population distribution and the region’s primary
tourism venues and infrastructure.



### Northeast Florida Current and Hi storic Air Service

The Jacksonville International Airport is the dominant air service airport in Northeast Florida. Jacksonville is served by s ix airlines and has nonstop air service on 28 routes. Just south of the Northeast Florida region, at Daytona Beach, two network carriers offer service to two connecting hubs.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 9

Jacksonville averages about 90 daily airline departures. Some 20% of seat capacity is provided by network carrier regional jets, co mpared to only about 4% regional jet operations at Fort Lauderdale, Fort Myers, Orlando and Tampa. The average seats per flight in 2010 was 109.

Daytona Beach air service is limited to Delta service to Atlanta and US Airways
service to Charlotte.

Delta and US Airways combine to offer an average of eight departures per day at Daytona Beach.

Average per flight seat capacity at Daytona Beach was 93 in 2010, implying a mix of regional jet and mainline equipment use.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 10

Northeast Florida (Jacksonville and Day tona Beach) regional domestic traffic has declined 15% from the 2007 peak while capacity is down 16% and the average fare is up 6%.



### Combined Jacksonville & Daytona Beach Traffic, Capacity and Average Fare

Measur ing over a longer period of time ; the region has slightly less capacity in 2010 (10,811 SDEW) than it did in 2003 (10,859 SDEW) . Measured over that seven year period regional domestic traffic is up 10% from 6,834 PDEW to 7,501 PDEW a nd the average domestic fare is up 16% from $125 to $145

.

Northeast Florida air service is stagnant. The merger of Delta and Northwest, the merger of
United and Continental and

, finally

, the merger of Southwest and AirTran has cost Northeast Florida three airline brands and reduced pricing competition by that number of carriers. The merger of Southwest and AirTran

, in particular, reduces the region’s roster of low fare carriers to only Southwest and jetBlue.

While the rest of Florida certainly is experiencing the same merger

- related impact, the significance is that Northeast Florida does not have service f ro m any of the various less

- than

daily (LTD) carriers, such as Allegiant, Vision, Direct Air or Sun Country. These carriers focus on bringing tourists to Florida and have brought significant capacity to Orlando Sanford, the Tampa

10,859 11,356 11,925 12,062 12,938

12,240 10,875 10,811

6,834 7,428 8,158
8,222 8,803 8,266 7,560 7,501 $125

$124 $126 $139 $137 $145

$133 $145

$100 $105 $110 $115 $120 $125 $130 $135 $140 $145 $150

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

2003 2004 2005 2006 2007 2008 2009 2010

Seats per Day Each Way Domestic PDEW Domestic Avg FareNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 11

Bay area via St. Pete, southeast Florida via Punta Gorda and Fort Lauderdale in the past five
years. With Vision Airline’s new focus city at Fort Walton Beach and continued expansion by all
th ese carriers

, it is estimated that in total they will generate 4,000,000 seats in and out of Florida in
2011. Vision’s new service at Fort Walton Beach means that Northeast Florida is the only region of the state that does not have air service by at least one less

- than

- daily carrier.



### Northeast Florida’s 30 Largest Domestic Markets: Year 2010

The top thirty domestic market chart reflects the nature of Jacksonville air service . Jacksonville generates 92% of Northeast Florida’s current domestic O&D traffic and has 93% of the region’s seat capacity (2010). Thus, Jacksonville traffic demand and service patterns will dictate the composition of the current top O&D traffic list. Nineteen of the top 30 O&D markets above have nonstop service from Jacksonville. Howe ver, only nine of the top markets have nonstop service
from one of the low cost carriers at Jacksonville.



### Northeast Florida Domestic Average Fares

The average domestic one way net fare paid by Northeast Florida passengers in 2010 was $146. For the top th irty domestic markets the average fare was $138 in the same period. This is due to the low cost carriers that provide Northeast F lorida service concentrating their service and trafficNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 12

capture in larger city pairs, leaving the bulk of the remaining traffic in smaller city

- pairs to network carriers and their typically higher fares.



### Average Fares in Northeast Florida’s 30 Largest O&D Markets: Year 2010

Northeast Florida Carrier Market Share

Southwest Airlines and Delta Air Lines are the dominant carriers in terms of market share in
Northeast Florida. Low cost carriers Southwest/AirTran and jetBlue make up only 32% of total domestic market share, with network carriers capturing the balance of the traffic in 2010.

Delta, 32%

Southwest/Air Tran, 27% US Airways, 18% United Continental, 10% American, 8% jetBlue, 5% 

# Northeast Florida Carrier Share 2010

Delta Southwest/AirTran US Airways United/Continental

American jetBlueNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 13

The First Air Service at Northeast Florid a Regional Airport

Skybus Airlines began operations from its Columbus, Ohio base in May of 2007. In July of that year the carrier became the first to operate at Northeast Florida Regional Airport.

By March of 2008 Skybus was operating four daily departures at Northeast Florida Regional. Northeast Florida service was a tremendous success for Skybus, with an average load factor over the nine months of operation of 74%. Unfortunately, Skybus was ill prepared for the difficul t fuel cost and traffic demand environment of 2008 and the carrier shutdown April 5, 2008.



### Skybus provided service from Northeast Florida Regional to three northern cities: Columbus, Greensboro and Portsmouth.

The tremendous traffic volumes the service generated, given an unknown airline, are proof that Northeast Florida Regional will support air service.

St. Augustine Greensboro Columbus PortsmouthNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 14

For the third quarter of 2007, the first quarter of SkyBus operations at Northea st Florida Regional Airport, the carrier reported to the DOT 16,210 O&D passengers at $62.30. For the fourth quarter
of 2007

, the carrier reported 26,917 O&D at $72.93. This DOT traffic data for both quarters matches the enplanement and deplanement data on the previous page. The carrier failed to file DOT traffic reports for first quarter of 2008.



### Alternative Airports

Without SkyBus service visitors to the Northeast Florida region and local residents relay primarily on the Jacksonville, Florida airport, located 14 miles north of downtown Jacksonville and 52 miles north of Northeast Florida Regional or on Daytona Beach, which is 57 mi les south of Northeast Florida Regional.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 15

NORTHEAST FLORIDA REGIONAL AIRPORT AIR SERVICE DEVELOPMENT INTRODUCTION Local Air Service Development Efforts

The Northeast Florida Regional Airport at St. Augustine has only been active in air service development since 2007, after the tremendous potential of the airport was illustrated by the SkyBus service of 2007

– 2008.
2007
 SkyBus begins service at Northeast Florida Regional in July. A irport assists carrier with ground handling support and works on additional routes that start in 2008.

2008
 Developed Presentations and Marketing Material for Pittsburgh ACI Jumpstart Meetings
and me t with Gulfstream, Spirit, Alaska/Horizon

, Southwest and Vision

.  Follow

- up Material Development and Contact s with Jumpstart Meeting participants and
had Air Service Development Consultant Meetings with United Airlines and Southwest

.  On

- site Meeting with Allegiant Airlines

. 2009
 Developed Presentations and Marketing Material for ACI Jumpstart Meetings in Montrea l

.  Met with Republic, Southwest, Spirit, Gulfstream and Pinnacle Airlines at ACI Jumpstart

.  Air Service Development Consultant Meetings with United Airlines, AirTran and Southwest

.  Follow

- up Material Development and Contacts with Jumpstart Meeting particip ants

.

2010
 Developed Presentation and Marketing Materials for Allegiant Airlines

.  Met with Allegiant Airlines at their corporate headquarters in Las Vegas, NV

.  Air Service Development Consultant Meetings with United Airlines and Southwest

.  Developed Presentation and Marketing Materials for Network USA Meetings

.  Met with AirTran, Spirit, Gulfstream, Southwest and Republic Airlines at Network USA, In Ft. Lauderdale, FL

.  Follow

- up Material Development and Contacts with Network USA participants

.  Develope d Email Marketing Materials for pre

- conference contact to all Jumpstart participant airlines

.  Developed Presentations and Marketing Material for ACI Jumpstart Meetings in San Diego, CA.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 16

 Met with Frontier, Southwest, AirTran, and Vision Airlines at ACI Jum pstart

.  Gold Sponsorship and Display and Booth at ACI Jumpstart Event

.  Follow

- up Material Development and Contacts with Jumpstart Meeting participants

.  Conference Call with GPT about NE Florida service potential with Vision or ExpressJet

.  Conference Call w ith Locair

.  Developed Presentation Materials for Sky King Airlines

.  On

- site Meeting with Allegiant

.

2011

 Ongoing conversations with both Allegiant and Direct Air as those carriers continue to evaluate the Northeast Florida Regional Airport and market area.
 Attendance at the Network Conference in Austin, Texas

, in March of 2011.
 Formal meetings at Network with six carriers : AirTran, Allegiant, Branson Express, Southwest, Vision and Vi V aAeroBus.
 Post Network Conference follow

- ups, as appropriate, with each of the six carriers with whom formal meetings took place.


## DEVELOPMENT EFFORTS

AIR SERVICE NEEDS AND DEFICIENCIES IN IDAHO FALLS
MPLEMENTATION TIMELINENortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 17

AIR SERVICE NEEDS AND DEFICIENCIES

Tourism is a major industry in the Northeast Florida region. The St. Augustine area alone hosts 3.4 million annual overnight visitors per year. Annual regional tourism spending of an estimated $634 million creates and supports over 11,000 local jobs.

The c o a stal area of Northeast Florida (called the First C oast) has more tourism attractions than any other Florida coastal area :

 Historic sites including Old St. Augustine, the oldest European settlement in North America (1565)

.  Numerous sites that mark the progress of Old St. Augustine from the earliest settlement period to the American Civil Rights movement in the 1960s.
 The area is home to three PGA golf tour events, the World Golf Hall of Fame, the World Golf Village and fourteen public golf courses.
 Over 90 marinas and over 10,000 locally based motor and sail boats.
 Miles of uncrowded beaches and world renowned deep sea or fresh water fishing.

To host all these visitors

, the St. Augustine area alone has 10,550 total accommodations at 171 facilities. The entire Northeast Florida region has an estimated 177,000 rental units at 2,452 facilities. There is great diversity in the local lodging infrastructure from internationally known resorts such as Ponte Vedra or the Marriott at Sawgrass down to camping and trailer sites. In April of 2011 the average visit or stay in the region was 5.39 days, the ADR was $99.57 and the local occupancy rate was 60.2%.

This vast local tourism industry competes for tourism visitors and tourism dollars with other warm weather beach locations and venues in Florida, on the North American continent

, and in the Caribbean. But the region competes with a distinct and significant disadvantage; a lack of leisure oriented air service and resulting high average fares that drive some tourism visitors to
other destinations.



### Northeast Flori da Airfares in Comparison to other Florida Leisure Destinations

The Northeast Florida region has measurably higher domestic airfares than almost all other leisure destination airports in Florida . The region is also the only in Florida (now that Vision Airlines has its focus city in Fort Walton Beach) without the benefit of nonstop less

- than

- daily air service.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 18

Of the eight Florida airports with a higher domestic average fare than in Northeast F lorida, only Key West (EYW) and Melbourne (MLB) are primarily leisure destination airports. Of the airports that have a lower average fare than Northeast Florida, many are primarily leisure destination s.



### Northeast Florida Historic Average Fares
Northeast Florida (Jacksonville/Daytona Beach) has had a higher domestic average fare each year 2003 through 2010 in comparison to Orlando, Tampa, Fort Lauderdale and Fort Myers.



### NE Florida and Major Florida Markets: Average Fare ComparisonNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 19

In recent years northeast Florida has been well above its peer group, as much as $15 and 12% higher than Orlando and Tampa. These average fare s paid discrepancies occur despite the presence of low

- cost airlines at Jacksonville, including Southwest, AirTran and jetBl ue.

The impact of these much higher average fares on the ability of northeast Florida tourism venues and lodging facilities to compete with other regions of Florida is obvious. Especially in these
austere economic times

, vacationers count dollars and cons umer consciousness about airfare dollars is always high.

This average fare discrepancy is even more glaring given that the two northeast Florida airports are closer, being on the north end of Florida, to most of Florida’s top domestic markets, especially those in the New England and the northeast U.S. Therefore, from a yield standpoint, northeast Florida travelers are paying between 20% and 30% more per mile than Orlando or Tampa travelers.



### NE Florida and Major Florida Markets: Yield Comparison

Clearly t he yield impact is not just from the higher average fares paid at northeast Florida airports but also reflects simple geography in that northeast Florida is closer to most of the nation’s key Florida travel generators than the other major Florida markets.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 20

The average domestic trip distance chart shows that northeast Florida average passenger trips are between 10% and 20% shorter than those at other a major Florida airports. 

### Alternative Airports & Traffic Leakage

Northeast Florida Regional Airport is perfectly positioned, both geographically and from a n infrastructure cost standpoint, to draw new low

- cost air service to the northeast Florida region. This new service will help mitigate the significantly higher average fares that northeast Florida

passe ngers are paying in comparison to average fares at other major Florida airports.

The significant average fare differential between northeast Florida airports and nearby Orlando (106 road miles and 1:44 drive time) certainly would suggest that some travele rs, both local residents and inbound tourists, use the Orland airport in lieu of Jacksonville or Daytona Beach.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 21

In thirteen of northeast Florida’s top twenty markets the Orlando average fare paid is lower, in
nine of the fifteen markets the percentage lo wer is double digits. Given the close proximity of
Orlando and the low cost of rental cars in Florida, these average fare differentials certainly suggest significant leakage of northeast Florida traffic to Orlando.



### The Traffic and Econo mic Impact That Less

- Than

- Daily Carrier Air Service Can Have
In the past eight years Allegiant Air has pioneered the concept of Less

- t han

- Daily (LTD) air service from small and medium sized cities to leisure destinations, first at Las Vegas and now at
four Florida destina tion airports plus Phoenix, Los Angeles

, Oakland and Myrtle Beach.

Several airlines are mimicking the Allegiant Air concept, including Direct Air, Vision and Sun Country. Even traditional Low

- Cost

- Carriers such as AirTran and Frontier have some LTD route s to complement their traditional daily service route structures.

LTD air service has one core focus : bring tourists from small and medium sized cities to leisure destinations, at low fares and with aggressive sale of ancillary services such as rental car s , hotel

room s and leisure activities.

LTD carriers have had a significant impact on the Florida leisure air travel market, bringing dramatically lower fare offerings from many northern cities to the Orlando, Tampa Bay, Fort Myers and Fort Lauderdale area s. Although data is not yet available, it would appear that the new Vision Airlines focus city in Fort Walton Beach will bring the same result to the Florida
Panhandle. 

### Domestic Average Fare by Year: Orlando International vs. Sanford 2003

- 2010Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 22

At Orlando

, the 2010 average domestic fare paid at MCO was 66% higher than that paid at Sanford, where several LTD carriers operate. In 2010 SFB carriers captured about 3% of total
Orlando domestic traffic. LTD carriers offer nonstop service to 37 cities from Sanford.

In the Tampa Bay region the average fare differential is even greater with the 2010 average domestic fare paid at TPA was 93% higher than that paid at St. Petersburg, where LTD carriers operate. St. Petersburg carriers captured about 5% of total PIE/TPA domestic traffic and offer nonstop service to 29 cities

. 

### Domestic Average Fare by Year: Tampa International vs. St. Petersburg 2003

- 2010

In Southwest Florida the Punta Gorda Airport has just

, in the past two years

, gained LTD carrier
service. In both 2009 and 2010 the LTD carriers at Punta Gorda captured about 1% of total Southwest Florida domestic traffic at average fares about 200% lower than at Fort Myers International airport. The Airport has mostly seasonal winter service to six cities.

Clearly LTD carriers have a huge impact on air service in Florida markets that draw inbound leisure traffic. Small and medium sized markets in the northern, mid

- Atlantic and Midwest regions of the country gain significantly lower average fares and nonstop service to Florida.

The economic impact of new less

- than

- daily air service is significant. A twice weekly service with a 150 seat aircraft will generate 208 segments and 31,200 seats per year. At an 85% load factor 26,520 O&D passengers are carried.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 23 TERNATE 

## PLAN

Even with modest assumptions about the percent of inbound origin passengers and using Northeast Florida averages for length of stay and daily spend, one single route flown twice a week brings over 4,400 new visitors to Northeast Florida, over 20,000 visito r days and over $2.6 million in local visitor spending.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 24

STRATEGIC PLAN FOR NEW AIR SERVICE

T he Northeast Fl orida Regional Airport believes that the successful recruitment of LTD air service, in the model of Punta Gorda, Sanford or St. Petersburg, will have a huge positive economic impact on tourism dependent businesses in Northeast Florida.

The Airport’s guiding strategic principals are;
 Develop a state

- of

- art airport facility that can offer ultra low costs for airlines, give passengers a pleasant transit experience and that is convenient to all of Northeast
Florida.
 Build a partnership with on

- field Ground Handling and Fueling companies and develop a complete and low cost ground handling package, including above and below wing service and low cost fueling service , for use by prospective LTD carriers

.  Bring together the local tourism industry, via their associations, and reach agreement that potential new LTD air service carriers will be able to reach commercial t erms on the
sub

- sale of Northeast Florida hotel/motel rooms, rental cars and other leisure activities via the carrier’s ancillary service offerings.
 Recruit LTD carriers aggressively, listen to their needs and concerns and respond as possible.
 Build a si gnificant marketing and advertising fund for use in partnership with LTD carriers to support their market entry and address their number one concern, how to market new LTD air service to Northeast Florida, which has not traditionally had such service.

All of the above principals are in place except for the development of a significant marketing and advertising fund for use in partnership with LTD carriers to address their concern about adequate marketing of new Northeast Florida LTD air service.

The Airpo rt seeks to put that last principal in place via this Grant application for marketing funding.



### A State

- of

- the

- Art Airport Terminal Facility

Allegiant Air is considered the most efficient LTD carrier in the United States. When Allegiant
officials first to ured the Northeast Florida Regional Airport terminal facility they stated that thisNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 25

was exactly how they would design a facility. This is high praise for an outstanding airport terminal facility.

The terminal building is designed for ease of use by both the customer and the airline. The above photo shows the terminal during SkyBus operations in 2007. The building is capable of handing two aircraft at once and several hundred thousand annual O&D passengers.


### Complete and Low Cost Ground Handling Service

The Airport receives significant rental revenue from various aviation related industries on the property. The Airport also will generate parking and rental car fees related to airline passenger through

- put. Thus the Airport is able to offer LTD ca rriers a long term waiver on all airport fees including landing fees, terminal or gate fees, bag claim or common use fees and fuel storage charges. The Airport has teamed with one of its Fixed Base Operators to offer a long term $350 per turn cost for any LTD carrier using typical mainline aircraft such as a 737, MD80 or Airbus A319. This cost includes above and below wing service and in

- to

- plane fueling charges. For a typical LTD carrier with an 80% load factor on a 150 seat aircraft this is means a total Cost Per Enplaned (CPE) of less than $3.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 26

Local Support v ia a Public Private Partnership

The Airport’s government and private sector partners in air service development include;

The City of St. Augustine

– The oldest city in North America is an active supporter of the Northeast Florida Regional Airport.

St Johns County Tourism Development Council

– The Mission Statement of the TDC is t o enhance, advertise and promote St. Johns County as a desirable travel destination, encouraging overnight stays and day visits, attracting visitors especially during non

- peak periods and encouraging visitor expenditures across all segments of the County’s tourism and travel industry.

Professional Golfers Association

– The PGA hosts three tour events annually in the St. Augustine area and is a strong advocate for local air service. The World Golf Hall of Fame is located at the World Golf Village in St. Augustine. It is supported by all the world’s leading golf organizat ions.

St. Augustine

– Ponte Vedra & Beaches Visitors & Convention Bureau (VCB)

- The mission of the
VCB is to brand and market the destination globally as a premier leisure, convention and business destination; to communicate the area's assets and inherent benefits to consumers, meeting planners, travel trade, media, local community and constituents; and to facilitate the opportunity for partners to promote their individual businesses within that framework.

Galaxy Aviation

– Galaxy is a full service Fixed B ased Operator with six locations nationwide.

St. Johns County Economic Development Council

– The Council has 304 members and its mission
i s t o bring new business into the community and to help existing business and industry to prosper.



### Aggressive Recruitment of New Air Service

The earlier section on history of recruiting efforts detailed the many years and many contacts the Airport has made to recruit new air service. Representatives from two LTD carriers have visited the airport and region and one carrier ha s written a letter of support for this Grant application.



### A Plan for New Air Service Using Grant Funding

Award of Grant funding for marketing and advertising will mean the Airport has all the pieces in place for the recruitment of successful new air service. Key steps in the successful implementation of new LTD air service using Grant funding include :  A clear set of goals and objectivesNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 27

 A defined target audience for grant supported services
 A detailed implementation timeline
 A funding plan
 Performance measurements and Grant related financial controls
 Self

- sufficiency contingency plans
 Designation of a legal sponsor to oversee the Grant



### Grant Application Goals and Objectives

This Grant document has illustrated that Northeast Florida air service is priced significantly higher than in the Orlando area, the Tampa Bay area, the Fort Myers area and at Fort Lauderdale. Furthermore, the primary tourism areas of Northeast Florida are some distance from the Jacksonville or Daytona Beach Airports.

Less

- than

- daily (LTD) airlines such as Allegiant, Direct Air, Vision and Sun Country are demonstrating on a daily ba sis the ability to profitably transport tourists to Florida, at Orlando Sanford, St. Petersburg and Punta Gorda.

The Northeast Florida Regional Airport, and its local public and private partners, believe that the Airport is the next LTD focus city in Flor ida. Our goal is simply to recruit and support LTD service from northern tier, mid

- Atlantic and Midwest cities to the Airport, bringing significant numbers of new tourists and their dollars to the economy of Northeast Florida.

We have all the pieces in pl ace to do this, including a n ultra low cost airport facility and ground handling program. We need grant funding to address the remaining concern of prospective LTD carriers, that being how to market this new Florida destination airport in small and medium sized cities in competition with the more traditional and already known leisure magnets like Orlando or Fort Myers.



### Grant Application Target Audience

The primary target audience for the Grant funded marketing and promotional efforts will be

consumers interested in visiting Florida that reside in the city and region near the airport that will receive nonstop flights to Northeast Florida Regional Airport.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 28

As was explained earlier in this document, one of the hesitations of airlines that the Airport has spoken to is related to consumer perception of gateway airports in Florida and that places like Orlando or Tampa are likely well known in that regard and Northeast Florida Regional at St. Augustine is most likely not known at all.

Thus a focused program t o promote the new air service in the northern tier or central U.S. city and region that will receive the new Northeast Florida Regional air service is a priority.

The Airport will have many allies in this effort

, including;

 The Airline, which has a vested interest in the success of the new service and also will want all marketing and promotional efforts to conform to its brand and advertising protocols.
 The Tourist Development Council of St. Johns County, which is strongly motivated to nurture low fare air service at Northeast Florida Region, as a successful low fare service at this Airport is a huge boon to county tourism.
 The resort and lodging entities and the tourism venues of the St. Augustine area, all of
which have su ffered a loss of business activity due to the recession and are hungry for methods to expand visitor events.

While exact marketing and advertising plans cannot be determined until the carrier and route are known, the Airport envisions that a typical new a ir service to a northern or central U.S. city will use some or all of the following marketing and promotional methods in the origin city;

1) Radio promotions and ticket/hotel package giveaways

. 2) Billboards, advertising the destination as much as the airline

. 3) Emails and postal mailings to consumers that are identified as previous visitors from zip code and address retention programs at northeast Florida lodgings and leisure venues. 4) Careful coordination with the existing northeast Florida promotional efforts of the TDC, turning those efforts to focus on the region where the new air service is to originate. TDC efforts cross a wide spectrum of media venues including newspaper, internet and radio.

Depending on the route and carrier business model the Airport will also market and promote the new air service in the northeast Florida region. To clarify this, if Allegiant is the carrier and the route is twice weekly to Allentown, PA, the Airport is unlikely to commit measureable promotionalNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 29

resources to the local north east Florida market. If, on the other hand, the carrier is Frontier with year round three or four times weekly service to Milwaukee or Kansas City with an extension to Denver, then the Airport may commit measureable promotional resources to the local marke t, give n that Frontier does not serve Jacksonville, operates a network type route system, and is committing significantly more frequency to the market than an Allegiant might.



### Implementation Timeline

Small Community Air Service Development Grant proposals are due to the Department on August 2, 2011. The Department has indicated a tentative timeline for proposal evaluation and grant awards that will announce grant designees in early fourth quarter of 20 11. Based on that tentative award timeline the Airport has developed the following timeline for implementing the use of Grant funding in support of new LTD air service at the Northeast Florida Regional Airp ort.

The timeline is tentative and will be driven by the date of Grant Award. The Airport believes that Grant Award will be the final piece of the puzzle and that new LTD service at Northeast Florida Regional Airport will be agreed upon and announced within months of Grant award
announcement.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 30

Fu nding Plan

The Airport requests in this Grant document $125,000 in Grant funding for the purpose of supporting the marketing and promotion of new air service at the Northeast Florida Regional Airport. The Grant funding of $ 125,000 would be supported by $10,000 is local non

- airport funding and $25,000 in local Airport cash funding for a total Grant funding of $160,000

.

While we cannot know the exact expenditure rate for Grant funding, we believe that Grant support ed marketing efforts will be distributed throughout the year 2012 and 2013, as appropriate for optimum support of new air service. Thus the Airport requests that its Grant have at least a two year term.



### Performance Measurements and Financial Controls ; Monitoring Grant Progress

All stakeholders in the Grant implementation, the Airport, its partners, the Airline, the TDC and local lodging and leisure venue entities, will be regularly apprised of the performance of the new air service, in terms of load fa ctor, average fare, revenue, and profitability. To the maximum extent possible, the stakeholders will reference actual market share performance and traffic mix metrics to determine if marketing and promotional efforts are successful. This will include
mapp ing zip codes for origin of traffic and comparison of that mapping to expenditures of Grant marketing and promotional funds. This will be done even if the route is performing well, since it may be performing well despite badly aimed marketing and promotion al efforts, and could be doing even better with resource allocation adjustments.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 31

Key milestones along the path of Grant success include :

 Having a clear understanding from the LTD carrier regarding its cost of operations and breakeven or profit making traffic and revenue targets.
 Monitoring of carrier advance booking and actual performance reports, not just for load factor volume, but also for average fare and ancillary revenue.
 Continuous monitorin g of carrier operational performance. Less

- than

- daily air service demands near 100% flight completion performance, for the simple fact that the next flight is not in a few hours but in a few days. Any reliability or on

- time performance issues
will be addre ssed with the carrier as soon as they emerge.

The Airport and its Executive Director will oversee performance measurement and ensure that Grant funds and local match fund spending is carefully tracked and wisely executed.



### Route Self

- Sufficiency

Marketing and promotion alone cannot make a new air service successful, nor be its downfall. However, the Airport and all Grant stakeholders recognize that marketing and promotion are
one essential element of a successful new air service.

The Airport has a comprehensive airport facility and ground handling package that complements the marketing and promotional efforts this Grant will support. These two key elements, combined with a passionate local commitment to make low fare air service happen
at Northeas t Florida Region al and a commitment to closely monitor new route performance, suggest that new low fare air service at Northeast Florida Regional will be successful or that mid

course adjustments in strategy and tactics, undertaken as needed, will result i n eventual success. The Airport and its local partners understand the need for success and will commit additional marketing and promotional resources, as needed, to ensure that success.

While the shutdown of SkyBus in 2008 was not in any way the fault or responsibility of the Airport, that sudden end of a popular air service is still well remembered. The Airport and its local air service development partners have no intention of allowing a repeat of the SkyBus shutd own in
late March of 2008.Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 32

Examples of Market Pairs that Grant Funding Would Support

The Airport does not, at this time, know what markets might be chosen by a carrier for new nonstop service to the Northeast Florida Regional Airport. Based on conversations with both Allegiant Air and Direct Air we can make the reasonable assumption that new service would be from northern tier, Midwest or mid Atlantic markets at which these two carriers already have
established service to other leisure destinati ons. Some of these potential destinations and
relevant market metrics for each are listed below.

In these five examples the average fare differential is very significant, averaging 30% to 50% higher at Northeast Florida than at Orlando or Tampa. With the exception of Chicago ORD to Jacksonville, none of the area markets listed have nonstop service to Jacksonville or Daytona
Beach.



### Grant Application Legal Sponsor

The legal sponsor of this application, Mr. Edward R. Wuellner AAE and Executive Directo r of the Northeast Florida Regional Airport, will oversee the implementation of this Grant. This oversight will include (but not be limited to) :Northeast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 33

 Liaison with the Department, including the timely filing of all quarterly Grant status update reports
 Conclusi on of all agreements with prospective airlines to serve the Airport
 Coordination and oversight of the implementation of Grant supported marketing and promotional efforts
 Oversight and coordination of the regular performance reviews of Grant supported
effor ts to ensure program success
 Approval of all expenditures of Grant funding, in close coordination with the Department and Grant program stakeholders

The contact information for the Legal Sponsor is :

Northeast Florida Regional Airport Edward R. Wuellner, AAE Executive Director 4796 U.S. 1
, North, St. Augustine, Florida 32095 904.209.0090 erw@sgj

- airport.comNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 34

SUMMARY

If the Airline Industry were to first come to Northeast Florida today, the first flights would not be at Jacksonville International or Daytona Beach, but at Northeast Florida Regional, an ultra low cost airport perfectly located in the center of the region’s population and tourist attractions.

But the Airline Industry is already in Northeast Florida and at the aforementioned Jacksonville and Daytona Beach facilities. The result of that is air service distant from the true destination of
tourist visitors and air service priced significantly higher than at other Florida airports li ke Orlando, Tampa, Fort Myers or Fort Lauderdale.

In this Grant proposal the Northeast Florida Regional Airport is seeking a modest amount of Grant funding (with a healthy local cash match) for the marketing and promotion of new less

- than

daily low fare a ir service at the Northeast Florida Regional Airport.

The Airport already has in place an innovative and creative package of airport facility and ground handling services that allow prospective new entrant LTD carriers to operate at much
lower costs than at Jacksonville or Daytona Beach.

The need for low fare air service at Northeast Florida Regional is clear :

 Northeast Florida air travelers using Jacksonville or Daytona Beach pay significantly higher average fares and exceedingly higher yields than do passengers using Orlando, Tampa, Fort Lauderdale or Fort Myers.

 In northeast Florida tourism is a critical aspect of the economy. Tourist lodging and leisure venues in the region must compete for tourist visitors and dollars with other part s of the
state. High airfares and limited nonstop low fare service is costing northeast Florida tourist
visitors and dollars.

 Skybus served Northeast Florida Regional for less than a year in 2007

– 2008. Yet this essentially unbranded startup airline generated over 107, 000 O&D passengers in thatNortheast Florida Regional Airport • Small Community Air Service Development Grant Proposal • August 2, 2011 

## 35 brief period before the airline, due to its own business miscalculations, shut down. The brief service does prove that “fly it and they will come” does apply to this Airport.

 The Airport and its local partners have a well struct ured plan to ensure that new low fare
air service that is introduced will be successful.

This Grant application is both modest in its funding need and precise in its focus. It is precisely the type of innovative and creative air service development effort the SCASD program was intended to support.

The Airport and its partners thank the Department for its consideration of this application.



## LETTER S OF SUPPORT

AVAILABILITY OF ALTERNATE AIRPORTS