Passenger Air Service Development Techniques (2009)

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TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2009 www.TRB.org A I R P O R T C O O P E R A T I V E R E S E A R C H P R O G R A M ACRP REPORT 18 Research sponsored by the Federal Aviation Administration Subject Areas Aviation Passenger Air Service Development Techniques Steven C. Martin INTERVISTAS-GA2 CONSULTING, INC. Washington, DC I N A S S O C I A T I O N W I T H VESTA RAE & ASSOCIATES, LLC Houston, TX ROBIN LEE MONROE & ASSOCIATES, LLC Washington, DC WORDSWORTH COMMUNICATIONS Wellsboro, PA

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in trans- portation of people and goods and in regional, national, and inter- national commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal respon- sibility for managing and regulating air traffic operations intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Coopera- tive Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near-term solutions to meet demands placed on it. The need for ACRP was identified in TRB Special Report 272: Airport Research Needs: Cooperative Solutions in 2003, based on a study spon- sored by the Federal Aviation Administration (FAA). The ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. It is modeled after the successful National Coopera- tive Highway Research Program and Transit Cooperative Research Pro- gram. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, mainte- nance, operations, safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport opera- tors can cooperatively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100-Century of Aviation Reauthorization Act. The primary partici- pants in the ACRP are (1) an independent governing board, the ACRP Oversight Committee (AOC), appointed by the Secretary of the U.S. Department of Transportation with representation from airport oper- ating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International-North America (ACI-NA), the American Association of Airport Executives (AAAE), the National Association of State Aviation Officials (NASAO), and the Air Transport Association (ATA) as vital links to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. In October 2005, the FAA executed a contract with the National Academies formally initiating the program. The ACRP benefits from the cooperation and participation of airport professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research orga- nizations. Each of these participants has different interests and respon- sibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited periodically but may be submitted to the TRB by anyone at any time. It is the responsibility of the AOC to formulate the research program by iden- tifying the highest priority projects and defining funding levels and expected products. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport pro- fessionals, the intended users of the research products. The panels pre- pare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing cooper- ative research programs since 1962. As in other TRB activities, ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the intended end-users of the research: airport operating agencies, service providers, and suppliers. The ACRP produces a series of research reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work- shops, training aids, field visits, and other activities to ensure that results are implemented by airport-industry practitioners. ACRP REPORT 18 Project 03-08 ISSN 1935-9802 ISBN 978-0-309-11802-6 Library of Congress Control Number 2009936855 © 2009 Transportation Research Board COPYRIGHT PERMISSION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB or FAA endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the Airport Cooperative Research Program conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. Such approval reflects the Governing Board’s judgment that the project concerned is appropriate with respect to both the purposes and resources of the National Research Council. The members of the technical advisory panel selected to monitor this project and to review this report were chosen for recognized scholarly competence and with due consideration for the balance of disciplines appropriate to the project. The opinions and conclusions expressed or implied are those of the research agency that performed the research, and while they have been accepted as appropriate by the technical panel, they are not necessarily those of the Transportation Research Board, the National Research Council, or the Federal Aviation Administration of the U.S. Department of Transportation. Each report is reviewed and accepted for publication by the technical panel according to procedures established and monitored by the Transportation Research Board Executive Committee and the Governing Board of the National Research Council. The Transportation Research Board of the National Academies, the National Research Council, and the Federal Aviation Administration (sponsor of the Airport Cooperative Research Program) do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the clarity and completeness of the project reporting. Published reports of the AIRPORT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national-academies.org/trb/bookstore Printed in the United States of America

CRP STAFF FOR ACRP REPORT 18 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Michael R. Salamone, ACRP Manager Eileen P. Delaney, Director of Publications Natalie Barnes, Editor ACRP PROJECT 03-08 PANEL Field of Policy and Planning Michael Audino, University of South Florida, Tampa, FL (Chair) Robert Ashcroft, Allegiant Air, Las Vegas, NV Michael Covalt, Arizona Airports Association, Green Valley, AZ Robert W. O’Brien, Jr., Chicago/Rockford International Airport, Rockford, IL Barney Parrella, (formerly) Innova Aviation Consulting, LLC, Bethesda, MD Marc P. Pelham, (formerly) Mobile Airport Authority, Mobile, AL Luther H. Roberts, Jr., Huntsville–Madison County Airport Authority, Huntsville, AL Sharon Glasgow, FAA Liaison David Cross, National Association of State Aviation Officials Liaison Aloha Ley, U.S.DOT Liaison Christine Gerencher, TRB Liaison AUTHOR ACKNOWLEDGMENTS The research study conducted for this guidebook was performed through ACRP Project 03-08 by Inter- VISTAS-ga2 Consulting, Inc. with the assistance of Vesta Rae & Associates, LLC, Robin Lee Monroe & Associates, LLC, and Wordsworth Communications. Steven C. Martin of InterVISTAS-ga2 Consulting, Inc. (InterVISTAS) was the Principal Investigator for the project and primary author of the guidebook. Nicole Guitebruegge, Mark Haneke, Neil Hathi, Howard Mann, Mike Morstein, and Geneva Tretheway of InterVISTAS assisted with the research and data collection. Jon Ash of InterVISTAS provided review and advice. Mark Kiehl, now with Palm Springs Inter- national Airport, contributed to the early efforts of the research. Vesta Rae Gaubert of Vesta Rae & Asso- ciates and Robin Lee Monroe of Robin Lee Monroe & Associates contributed to the early research and data collection. Julia L. Johnson of Wordsworth Communications provided invaluable assistance with organizing, presenting, and editing the report and its many drafts. The study team would like to sincerely thank the many airports and airlines that participated in the research for sharing their data, insight, and time. Their experiences with efforts to improve their own air service and willingness to share those experiences enrich this guidebook. C O O P E R A T I V E R E S E A R C H P R O G R A M S

This guidebook should be of interest to airport managers and local government repre- sentatives interested in retaining existing and/or attracting new commercial air service in small communities. It provides information on the air service development (ASD) tech- niques, tools, and programs that smaller communities have used, including minimum rev- enue guarantees, guaranteed ticket purchases (i.e., travel banks), cost subsidies, marketing and advertising, and non-financial (i.e., in-kind) contributions, among others. The guide- book is organized into two major sections. The first section discusses the context for ASD, particularly the financial condition of the U.S. aviation industry and the basic underlying competitive challenges that small communities face in retaining or enhancing their com- mercial air service. The second section discusses how communities can address those chal- lenges, and describes the basic components and tools of an ASD program. The guidebook is intended to help small communities develop and execute an ASD program. Development of air service is a priority for many communities. Yet, ASD teams have little practical guidance on what techniques exist and which are effective. Air service development includes the attraction, initiation, expansion, retention, or any improve- ment of air service and can include changes in pricing, frequency, capacity, hub connec- tivity, or the number of nonstop destinations served. ASD techniques can include incen- tives; subsidies; guarantees; changes to rates and charges; marketing; cost-reduction measures; airport–community–airline partnerships; reduction of third-party costs, such as ground handling or fueling services; or any other approach taken to encourage development of air service. Under ACRP Project 03-08, InterVISTAS-ga2 Consulting was asked to develop a guide- book that describes techniques that airports and communities can employ in their efforts to develop passenger air service. The guidebook was to include fundamental information to assist airports and the communities they serve in understanding the nature of ASD within the general context of the airport, community, and airline business perspectives. To accomplish the project objectives, the research team (1) conducted a thorough review of relevant domestic literature, existing research, regulatory requirements, pub- lished practical guidance, known techniques, and other appropriate material; (2) collab- orated with industry associations (i.e., Airports Council International–North America, American Association of Airport Executives, National Association of State Aviation Offi- cials, Regional Airline Association, and Air Transport Association); (3) interviewed key individuals from the ASD teams of a representative cross section of communities, includ- ing airports that have received but no longer receive subsidies from the Essential Air F O R E W O R D By Michael R. Salamone Staff Officer Transportation Research Board

Service (EAS) program, airports that have received Small Community Air Service Devel- opment Program (SCASDP) grants, and airports that have active ASD programs indepen- dent of EAS and SCASDP; (4) established the current state of ASD experience in the air- port industry; (5) summarized experience to date in assessing existing or potential air service and compiled a comprehensive list of techniques for developing air service; and (6) prepared the guidebook.

1 Summary P A R T I Overview of Air Service Development 17 Chapter 1 Using this Guidebook 17 What is the purpose of this guidebook? 17 Who should use this guidebook? 18 How is this guidebook organized? 19 How was the research conducted? 21 Summary 22 Chapter 2 Understanding the Role of Air Service Development 22 What is air service development? 22 Why is air service development important? 24 How do air carriers decide which airports they will serve? 27 How can an airport or community influence air service decisions? 28 What other stakeholders can be involved? 29 What factors are not within an airport’s control? 29 What is the ASD process? 30 Summary 31 Chapter 3 Understanding the Context for Air Service Development 31 How do smaller communities connect to the national aviation system? 34 What are the most significant recent trends in the airline industry? 44 What are the key relevant regulatory issues? 46 Summary 47 Chapter 4 Understanding the Key Challenges to Viable Air Service at Smaller Communities 47 How do local demographic and economic characteristics influence air service? 48 What are small airports’ most common competitive challenges? 54 Summary P A R T I I Best Practices for Air Service Development 57 Chapter 5 Taking Stock of the Situation 57 What are the airport’s current services and how are they performing? 64 Where do key community groups want to fly? 65 How are a facility and its costs assessed? 67 How does the airport compare to its peers? 71 Summary C O N T E N T S

72 Chapter 6 Identifying Available Resources to Enhance Air Service 72 What sources of airport revenues may be available to fund ASD? 78 How much do other airports devote to ASD? 78 What types of human resources are needed for successful ASD efforts? 81 Summary 82 Chapter 7 Establishing and Validating ASD Goals 82 What is the overall process for identifying goals? 83 What are the categories of ASD goals? 97 What other goals support ASD? 99 What is the process for validating and refining ASD goals? 103 Summary 104 Chapter 8 Selecting Appropriate Techniques for Air Service Development 104 What revenue-related ASD techniques are available? 107 What cost-related ASD techniques are available? 114 What are the legal issues regarding airport incentive programs? 117 Which techniques should the airport use? 121 Summary 122 Chapter 9 Making a Compelling Case to Airlines 122 What should ASD teams and communities expect? 122 What information do other airports present to airlines? 122 What data and information do the airlines want to see? 132 How should the information for presentations to airlines be organized? 134 How should an airline be approached? 137 Summary 138 Chapter 10 Evaluating and Improving ASD Efforts 138 Why is evaluation so important? 138 How is effectiveness in ASD measured? 143 Who should conduct the evaluation? 144 When should an evaluation be conducted? 144 Why do stakeholders need to be informed? 145 Summary 146 References P A R T I I I Appendices 149 Appendix A Glossary 153 Appendix B Frequently Asked Questions 157 Appendix C Annotated Bibliography