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Not for Sale

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APPENDIX B Frequently Asked Questions What do you mean by "air service development"? Air service development (ASD) generally refers to a variety of activities with the ultimate goal of retaining existing air service or improving air access and capacity in order to develop the econ- omy of a community or region. It encompasses attracting, initiating, expanding, retaining, or improving any aspect of air service to a particular airport. ASD includes understanding the local community and what drives its economy, and recruit- ing community and business leaders to participate in efforts to "sell" the airport to the airlines and to the local population. It includes understanding the air service and fares that airlines offer, and how the service, fares, and facility compare to those of nearby airports. ASD also involves understanding the cost and revenue issues that influence carriers' decisions on which markets to serve. It requires understanding the flexibility an airport has in extending financial and non- financial incentives to carriers. ASD encompasses understanding what carriers value most and what they want to know about your community. It includes knowing how to make and present a sound business case to airlines. Don't airlines just decide by themselves where to fly? What can a local community do to influence those decisions? Airports and communities can help carriers decide whether to serve a market or not by pro- viding them with information that they might not otherwise have had. Airlines have limited numbers of route planners, and they tend to focus more on larger markets. Airline staff may be relatively unfamiliar with changes in a local area's economy or existing air service. New or expanded businesses in an area can generate the amount and types of employment that can make air service viable. If a community does not make the effort to bring that sort of news to an air- line's attention, the carrier may never learn of the opportunity or the community's unmet air service needs. How important are incentives to airlines in deciding where to fly? Airlines vary in the importance that they attach to financial incentives. Airlines know that financial support programs such as grants or incentives eventually end. If the market cannot sustain the service without assistance, it may not be worth the investment in time, effort, and personnel. Airlines also know that a decision to leave a market creates negative publicity and ill feelings that can be difficult or impossible to overcome, so they resist investing in margin- ally profitable routes. At the same time, however, many carriers look for--and now expect-- a community to offer some form of financial risk-sharing in association with new service. 153

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154 Passenger Air Service Development Techniques The price of oil skyrocketed and then dropped by one-third. Will moderating prices of jet fuel help airlines maintain service to small communities? Fuel is now the largest single component of large air carrier costs. It is difficult to say how airlines will respond to fluctuations in fuel prices. Generally, carriers plan their capacity well in advance. Part of the reason that oil prices have fallen is due to expectations of declining demand for gasoline, brought on by fears of a major economic downturn in the United States and the rest of the world. If that turns out to be true, demand for air travel will also drop. Conversely, if fuel prices stay down and demand rebuilds, carriers also can act relatively quickly to restore capacity to those markets where it makes the most sense (i.e., where they can generate the greatest returns on investment). Why is it so difficult for airlines to serve small communities? Small communities face a number of key challenges that make it very difficult for airlines to provide service there profitably. The major challenges relate most often to the communities' proximity to other larger locations that have superior air service--superior in terms of price and quality (i.e., frequency and connectivity). As a result, many passengers who might otherwise use the local small community airport divert to the larger airport. Where there are no nearby com- petitors, small communities are hampered by the underlying economics of their area. Smaller population bases do not typically generate significant passenger demand for air travel. Airlines have determined that the revenue from that passenger demand is often insufficient to allow them to operate profitably. Why have regional jets become unpopular with airlines? Changing regulatory safety requirements increased the costs of operating smaller aircraft. Evolving aircraft technology and provisions in airlinelabor agreements led to a proliferation of regional jets in the late 1990s, which passengers tended to prefer over turboprops with visible propellers. However, the cost of operating all these aircraft has soared in recent years because of the price of fuel. Coupled with the effect that energy costs have had on the economy as a whole, most major airlines have announced significant cuts in service beginning in late 2008. Who are the key stakeholders to involve in an ASD team/task force? In any community large enough to support commercial air service, there will be a relatively short list of stakeholders with whom the airport should partner: Major employers (the principal driver of air service demand in the area) The chamber of commerce/tourism office (The chamber represents all businesses in the area and thus can help obtain information on travel demand and marshal resources to support ASD. The tourism office may be more concerned about inbound traffic.) Local hotel associations and resorts The local economic development agency and/or other parts of the local municipal government. What are the major causes of passenger leakage? Passenger leakage is attributable to a number of factors, but the most important ones concern differences in airfares, convenience (e.g., nonstop flights), and ease of access (e.g., the ability of travelers to get to the other airport easily and relatively quickly, usually by interstate highway). Leisure passengers are especially price sensitive. Business passengers are less sensitive to airfares, but also take travel times (e.g., flight frequencies and nonstop versus connecting flights) into account. Does the FAA have to approve all incentive programs? Yes and no. The FAA does not approve programs before an airport implements them, although officials in the compliance division are available to offer suggestions or guidance to

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Frequently Asked Questions 155 communities considering incentive programs. If a program runs counter to federal policy, requirements, or guidance, the FAA will act to force the airport to correct those deficiencies. What are the most common types of ASD goals? Airports that were surveyed identified several general categories of ASD goals: Retaining existing service Adding service to a new destination Adding frequencies to current services Lowering fares/introducing new competitive service Improving service reliability Upgrading aircraft Increasing access to global networks Retaining existing service by incumbent carriers was the top goal identified by the airports surveyed. Are any particular ASD techniques more effective than others? Whether a particular ASD technique is "effective" or not depends largely on the airport's unique competitive situation and the carrier it is targeting. There are numerous factors that communities should weigh in making this decision. As this guidebook illustrates, some techniques worked well for certain communities with certain goals. Different airports can draw on those experiences, to the extent that they confront similar circumstances and pursue similar goals. One approach that is valuable in all situations is to ensure that the major local employers and stakeholders are involved. However, changing economic circumstances, both locally and throughout the national economy, can fundamentally alter the equations. How much should a community plan to spend on ASD? The amount that small community airports and their surrounding communities devote to ASD varies considerably, reflecting differences in air service activity, ASD goals, strategies, and the ability of stakeholders in the surrounding area to contribute. Small hub airports were generally able to provide more airport-originating funds than non-hub airports for ASD efforts. Contributions from the private sector and the federal government tended to be greater for non-hub airports. Small airports may devote over $100,000 to ASD, but that figure varies widely. What information does my airport need to present to an airline? Virtually all U.S. airlines have operations and enplanement data that are at least as detailed and timely as anything that an airport can provide to them. The airlines want to see information that they do not usually collect or to which they do not have easy access. This information could include items such as local economic and demographic data, details about local businesses and their travel habits, information about local civilian and military government facilities, and information about local tourist attractions that drive inbound leisure traffic. Airlines the study team spoke with said that they were most interested in economic and demographic information, as well as data on potential passenger demand. Does an airport really need to hire a consultant? Not necessarily, but most small airports may benefit from the expertise that consultants provide. Because ASD consultants generally have worked for at least one (and often several) airlines or airports, they have first-hand, inside knowledge about how the industry looks at air service opportunities. Consultants also can help assemble, analyze, and package information about the local market--data that the airlines generally do not gather themselves. If an airport does not have ready access to key sources of information and does not have in-house staff

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156 Passenger Air Service Development Techniques experienced with analyzing and presenting information, they likely could benefit from a con- sultant's services. How long should ASD efforts reasonably take before producing results? Communities should understand that ASD efforts can require well over a year and should adjust their expectations accordingly. Securing air service may require a prolonged effort--a number of industry conferences and headquarters meetings may be required. Depending on the service that a community seeks, it may need to begin by establishing a rapport with the targeted airline. The initial meeting is the first step in a process that may take a number of months or years. Do the ASD efforts really need to be evaluated? Evaluating results are an essential element of an ASD program, as it allows ASD teams to re-examine how well their efforts worked and decide what changes, if any, should be incorporated. There are several different measures of an effort's outcome to consider. These include both the immediate measures (e.g., Did service start? Did the carrier use a larger aircraft?), and also other measures of passenger acceptance and airport revenues generated (e.g., incremental parking fees). It is important to assess the effects of changes on the incumbent carriers.