Passenger Air Service Development Techniques (2009)

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“Air service development” (ASD) is a broad term that encompasses activities with the ulti- mate goal of retaining existing air service or improving air access and capacity in order to develop the economy of a community or region. For the purposes of this guidebook, ASD involves all activities directly related to enhancing commercial passenger service at an airport. It includes understanding the local community and what drives its economy, and recruiting community and business leaders to participate in efforts to “sell” the community to the air- lines. It includes understanding the air service and fares that airlines offer, and how the airport’s service, fares, and facility compare to those of nearby airports. ASD also involves understand- ing the cost and revenue issues that influence carriers’ decisions on which markets to serve. It requires understanding how an airport can extend financial and non-financial incentives to carriers—both those already serving the facility (incumbents) and those being recruited. ASD encompasses understanding what carriers value most and what they want to know about a community. It includes knowing how to make and present a sound business case to airlines. And it includes understanding how to evaluate the ASD efforts and revise them as needed. This guidebook is targeted toward the ASD needs of smaller communities. Many small communities—that is, those communities served by the 426 small- and non-hub airports in the United States—have traditionally had difficulty attracting and retaining service. The guidebook is organized into two major parts. The first part discusses the context for air service development, 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 commercial air service. The second part discusses how communities can address those challenges. Part II lays out the basic components of or steps in an ASD program. A word of caution: The approaches outlined in this guidebook cannot guarantee success. As everyone in the industry well knows, there are no guarantees in this business. The indus- try is subject to external forces that will wreak havoc with the best business models. That being said, there are strategic, proven ways to approach the issue of attracting new service—or simply retaining your existing service. This guidebook is intended to help small communities build and execute an ASD program or improve their existing efforts. Importance of air service development and what it encompasses Air service is important for communities because of its value as an economic driver. Adequate air service is a prerequisite for attracting investment and generating employment. Air service is directly related to the amount of economic activity in an area, and additional 1 S U M M A R Y Passenger Air Service Development Techniques

flights contribute to a community’s economic well being. Losing air service can hamper eco- nomic activity and growth. Commercial air service is taken as a “given” in many communi- ties. It should not be. Since the aviation industry was deregulated in 1978, airlines have largely been free to decide where in the United States they want to operate, how often they want to fly there, with what equipment, and how much they want to charge. Airlines decide which markets they will serve by weighing projected revenue against the estimated cost of providing service. On the revenue side of the equation, airlines focus on the size of the actual and potential mar- ket. The cost side of the equation can be staggering. The price of jet fuel has driven up air- line operating costs dramatically over the last five years and is now the single largest cost ele- ment. Total industry expenses for fuel in 2008 will exceed $50 billion—a remarkable three-fold increase since 2000, even given the recent collapse in the per barrel cost of oil. The importance of airport costs such as landing fees and counter and office rentals cannot be underestimated. Similarly, costs associated with launching service at a new community (e.g., repositioning equipment) can be difficult for carriers to absorb. Understanding how carriers decide which communities they will serve is fundamental to developing an ASD program. Many carriers look for—and now expect—a community to offer some form of financial risk-sharing in association with new service. Because commit- ting an aircraft to a market represents a large risk of a major asset, the level of local support can be a key factor in airlines’ decisions. Airports and communities can help carriers decide whether to serve their market in a number of ways. They can provide information that the carriers might not otherwise have had, particularly on changes in the local area’s economy. They can organize efforts to influ- ence the local demand for travel. They can support development of financial incentives to offer the carrier as a way to share the risk of starting new service. Airports and communities can also actively contribute to incentive programs and provide marketing assistance to air- lines. All of these initiatives are ASD techniques, and they are vital for retaining and possi- bly expanding air service to small communities. The airport is the natural central stakeholder in any ASD effort. Other key stakeholders will include the major employers in the area and/or the local chamber of commerce, the local economic development agency, and local hotel associations and resorts. Air service development in context Most small communities connect to the national aviation system as “spoke cities” served by network airlines—American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines, and US Airways. Service at those cities is most often to the carrier’s hubs, where passengers can connect to flights to other destinations. Relatively few low-cost carriers (LCCs), such as Southwest Airlines or AirTran Airways, serve small communities because of inherent differences in their business models. Certain niche carriers (e.g., Allegiant Air or USA 3000 Airlines) may serve small communities, but not with the same amount of service provided through a legacy carrier’s regional affiliates. The network carriers’ hub-and-spoke systems underscore the important role played by regional airlines in connecting smaller communities to the national aviation network. Regional airlines provide short- and medium-haul scheduled service connecting 635 U.S. communities with larger cities and hub airports. The challenge for airlines is to match the relatively lim- ited passenger demand in those communities (along with its corresponding limited revenue) 2 Passenger Air Service Development Techniques Understanding how air carriers decide which communities they will serve is fundamental to developing an ASD program.

with the right amount of capacity, while controlling operating costs. Regional aircraft— generally, those ranging in size from 9 to 108 seats—have typically been used to serve small communities. Commercial airlines have always struggled to find business models that are viable over the long term, which makes serving small communities especially challenging. The industry has historically experienced pronounced business cycles of profitability and loss. In fact, since the industry’s inception, it has failed to generate a long-term positive net operating profit. To minimize expected losses resulting from soaring fuel costs and a decline in passenger demand in 2008, carriers announced significant reductions in capacity. Carriers decided to ground older, less fuel-efficient aircraft and to reduce flying. Regional jets, with their rela- tively high operating costs, have been the target of many reductions. Continental and Delta, for example, both announced significant cuts in its regional jet operations. Many smaller communities are losing service. The U.S. Government Accountability Office (GAO) reported that 38 communities lost all commercial service between the fourth quarter of 2007 and the fourth quarter of 2008. In this environment, ASD is more important than ever simply to retain service. However, it must be undertaken with a realistic understanding of the context in which commercial air- lines operate and their ongoing challenge of earning a return on investment. Major competitive challenges to ASD at small communities Each of the 426 small and non-hub airports in the United States operates under its own unique set of circumstances that further challenge its ability to retain or enhance commer- cial air service. As a result, almost all small airports suffer from “passenger leakage”—a phe- nomenon in which passengers bypass the nearest airport and instead choose to fly out of a competing facility. Airports surveyed for this research effort reported that the primary rea- son they lose business passengers to other nearby airports is the greater range of choices available there—nonstop flights, more convenient arrival and departure times, and more frequent flights. When leisure passengers choose alternative airports, they are most often lured by lower fares. They also prefer airports with nonstop service to their destination. The major competitive challenges facing small communities include: • Proximity to legacy network hub. Many smaller community airports are relatively close to a legacy network carrier’s hub. As a result, passenger traffic that the airport might oth- erwise have captured drives—aided by easy highway access—to the larger airport, which offers service to more nonstop destinations, with multiple daily frequencies, often using larger aircraft. Attracting new service to smaller markets near a hub can be difficult because carriers realize that passenger leakage to the hub will be difficult to reverse. • Proximity to airport with low-cost carrier service. Similarly, many smaller communi- ties are also close to an airport served by an LCC. Some travelers—especially leisure trav- elers who typically value fare savings over total travel time—will drive relatively long dis- tances to reach an airport served by Southwest, AirTran, Frontier Airlines, or other LCCs. Attracting new service to these markets can be difficult because carriers realize that unless they can match the LCCs’ fares, a portion of the market will continue driving to other air- ports for LCC service. • Small populations that are geographically isolated. Some smaller communities have dif- ficulty attracting additional air service simply because they draw from an area with a rela- Summary 3 Many smaller communities have lost service. GAO reported that 38 communities lost all service between the end of 2007 and the end of 2008.

tively small population and a limited amount of economic activity. Attracting new service to these markets can be challenging. Very small, isolated markets have difficulty support- ing more air service. Further, local passengers in such markets are often loyal to the incumbent airlines. • Fragmentation of the local passenger traffic base among competing nearby airports. Other smaller airports may not be in the figurative shadow of a hub or an airport served by an LCC, but they might be close to several other smaller airports that have commer- cial service. Attracting new service to these markets can be difficult because carriers believe that the overall catchment area is already quite competitive. • Predominantly inbound markets that rely on tourism. Some small communities are located near attractions where tourism and travel demand is seasonal in nature. These attractions may include major national parks (such as Kalispell, Montana, at the western edge of Glacier National Park) or ski resorts (such as Sun Valley, Idaho). Year-round res- idents of such communities may have abundant (albeit expensive) service during the peak season, but far less service during the off season. Attracting additional service can be dif- ficult for these communities because airlines may not understand the full range of year- round economic activity. Table S.1 provides examples of some of the primary competitive challenges faced by small community airports. Smaller communities’ airports often face more than one significant challenge. For exam- ple, Harrisburg, Pennsylvania, is within a relatively short drive of several major airports, including Washington Dulles (a hub for United also served by JetBlue Airways, Southwest, and Virgin America), Baltimore/Washington (Southwest’s largest East Coast operation), and Philadelphia (a hub for US Airways). 4 Passenger Air Service Development Techniques Major Competitive Challenge Communities Proximity to legacy network hub Logan, UT Kalamazoo, MI Toledo, OH Rockford, IL Harrisburg, PA Colorado Springs, CO Proximity to airport with LCC service Huntington, WV Daytona Beach, FL Santa Rosa, CA Mobile, AL Rockford, IL Harrisburg, PA Small, isolated communities Butte, MT Marquette, MI Idaho Falls, ID Victoria, TX Dickinson, ND Fragmented market Greenville, NC Ithaca, NY Mobile, AL Lawton, OK Florence, SC Stewart (Newburgh), NY Predominantly inbound (tourist) market Hailey, ID Hayden, CO Kalispell, MT Table S.1. Examples of competitive challenges at selected communities with smaller airports.

Addressing competitive challenges through an active ASD program How airports can begin to address those challenges is discussed in Part II of this guide- book, which lays out a systematic approach to ASD. These discussions draw on examples where communities facing each of these situations have been successful in attracting or retaining their air service. Figure S.1 summarizes the major elements of an ASD program. Assessing Existing Service and Stakeholders An effective ASD program begins with a realistic assessment of an airport’s services and facility to identify how its air service can best be improved. First, airports need a complete picture of their existing air service and how well it meets the needs of the traveling public. Capturing a complete picture involves analyzing passen- ger and airline data in their top origin and destination (O&D) markets as well as assessing how convenient and competitive the airport’s services and access to the airport are. As part of that, airports should analyze their major route deficiencies—markets that could poten- tially support, but currently lack, nonstop service. Because smaller communities most often connect to the national aviation system through legacy carriers’ networks, analysis of route deficiencies usually means analyzing the community’s ability to support nonstop service to a different hub. Different hubs may provide new connecting possibilities (e.g., cities not already served on a one-stop basis) or less circuitous routings to other destinations. Second, passengers associate the performance and convenience of the air carriers with the desirability of the airport. Examining issues such as air carrier pricing, capacity, aircraft type, and reliability helps to identify and prioritize potential improvements in air service. Airports Summary 5 Identify Available Resources Assess Existing Service; Identify Deficiencies Identify Major Stakeholders Establish and Validate Goals Select ASD Strategy and Techniques Evaluate Present a Compelling Case to Airlines Figure S.1. Overview of the ASD process. All small communities’ airports suffer from passenger leakage—most often because of their relatively high fares.

should determine whether the pricing of their service is high relative to that available at other competing airports, whether they are served with adequate capacity (i.e., are flights often oversold?), whether a different aircraft type might be better suited to their markets (e.g., air- craft with a business class cabin), and how reliable the service tends to be. Airports surveyed reported that the most significant problem they faced were their rela- tively high fares. (See Figure S.2.) Airports should also assess the extent to which their infrastructure—on both the air side and the ground side—can influence air service. Comparatively high landing fees, ground handling costs, terminal rents, and other charges may discourage some carriers from oper- ating at a location. Runway lengths and/or obstructions might also limit operations of some aircraft. The final major component of an airport’s assessment requires understanding why pas- sengers choose to fly from its facility and why they might choose another airport (what spurs leakage). Unless an airport has a good grasp of its competitive situation vis-à-vis other nearby airports, it will be impossible to define an effective ASD strategy. Identifying Available Financial and Human Resources For an ASD program to have a reasonable chance of success, it must be appropriately sup- ported. Effective ASD needs two types of resources: financial and human. Two general areas of financing are available to meet an airport’s ASD funding needs: revenues generated by the airport itself and revenues derived from other sources, such as private corporations, tourism organizations, and government at various levels. 6 Passenger Air Service Development Techniques 0% 10% 20% 30% 40% 50% 60% 70% 80% Circuitous routings Turboprop rather than RJ Difficult connections Inadequate capacity Unreliable service No low-cost carrier Top destinations not served non-stop Fares too high Percent of airports surveyed Figure S.2. Major air service problems identified by small airports.

Airports have several different sources of potential revenues that could be used to fund an ASD program. Most airports generally fund their ASD programs through their marketing budgets, which ultimately come out of their operations budgets. Those funds are derived from in-terminal revenue sources such as passengers, airlines, concessionaires, and adver- tisers, as well as non-terminal sources such as air freight companies, maintenance organiza- tions, fixed base operators, aircraft manufacturers, and land rentals. Airports that accept any federal monies are restricted by law, regulation, and various agreements on the use of revenues generated by airport operations. The FAA monitors compliance with applicable policies, guidelines, agreements, and regulations. Other sources of revenue not derived directly from an airport’s operations can also support an ASD program. The most important sources of outside (non-airport) funding are private corporations and related associations. The greater the involvement of private corporations, the greater the likelihood of success in retaining existing or attracting new service. If the business travel needs of corporate employees are not being met, it can be in the best interest of local businesses to support improved air service. Resorts, hotels, convention/visitors bureaus, and area attractions that depend on travel and tourism may financially support ASD efforts. The federal government has been a major provider of funding for ASD. The Small Community Air Service Development Program (SCASDP) provides grants to help small communities achieve sustainable air service. Through fiscal year 2007, U.S.DOT issued more than 200 SCASDP grants totalling approximately $100 million to small- and non-hub com- munities. SCASDP grants have ranged from $20,000 to $1.6 million and have funded a wide range of air service initiatives. The other critical resource that airports absolutely must have for an effective ASD effort is people with the expertise and enthusiasm to help. Most small community airports have capable staff already working at the airport that can fill important needs. But to be success- ful, ASD efforts usually must rely on a task force that includes other local professionals and outside consultants. The skills and expertise that consultants can bring to ASD issues can be complemented by local professionals who bring the background and insight into the com- munity’s strengths. Table S.2 summarizes how much airports of different sizes devoted annually on their ASD efforts, including contributions from non-airport sources. Reflecting their considerable Summary 7 Key ASD program elements: • The greater the involvement of private corpora- tions in your ASD efforts, the greater the likeli- hood of success in retaining existing or attracting new service. • ASD efforts usu- ally must rely on a task force that includes other local professionals and outside consultants. Category of ASD Resources Hub Size Airport “Core” Resources 1 Airport “Extra” Resources 2 Private Sector Contributions Federal Contributions Non-hubs $53,000 $100,000 $350,000 $500,000 Small hubs $125,000 $125,000 $250,000 $480,000 All hubs $70,500 $100,000 $325,000 $500,000 Notes: 1. “Core” resources are financial resources devoted to ASD-related salaries, data costs, and other expenses normally associated with basic ASD, such as conference attendance and travel costs to visit airline headquarters. 2. “Extra” resources are those affiliated with particular types of incentive programs, such as minimum revenue guarantees, subsidies (e.g., fee waivers), and marketing efforts, particularly where airport funds are used to match non-airport funds. The numbers are not additive. For example, not all airports received federal assistance, and not all applied resources to “extra” ASD efforts. Thus, one should not add the numbers across and suggest that the median amount of resources applied to ASD by all hubs in the survey to be $995,500. Table S.2. Median amount of resources applied to ASD, by hub size and category of assistance.

differences in air service activity and the amount of economic activity in the surrounding area, 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 gov- ernment tended to be greater for non-hub airports. Establishing and Validating ASD Goals The community should be meaningfully involved in setting ASD goals. The best way to involve the community is to work with key stakeholders on a regular basis. Most commu- nities interviewed in the survey had either longstanding or newly formed community groups that focus on air service issues. Figure S.3 and the following list summarize the most frequently mentioned major goals identified in the survey: • Retaining existing service. Retaining existing air service may be the most important goal for many smaller communities. The need for small airports to retain existing service is important in and of itself, and it also affects an airport’s ability to recruit additional or expanded service. An incumbent’s leaving may open the door to a new entrant, but small airports will face negative market impressions that either the community is too small to support service or the market is too competitive for a carrier to have sustainable business. • Adding service to new destinations. Incumbent carriers generally understand a commu- nity’s traffic patterns. Thus, expanding the service offered by incumbent carriers—especially to a new destination or hub—is often a top goal. Now more than ever, communities realize that bringing in another carrier to compete directly with their existing services could be harmful to the sustainability of their market. For some airports, adding new service on 8 Passenger Air Service Development Techniques Figure S.3. Most frequently mentioned ASD goals. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% Retain Existing Service Add Service to Other Hubs Add Frequencies Lower Pricing Improve Service Reliability Upgrade Aircraft Used Percent of airports surveyed

another legacy carrier to a new connecting hub may be a goal to work towards. Service to a different hub may also introduce new possible connections that were previously unavailable. Gaining additional service from incumbent carriers may also mean increased access to major international gateway airports. • Adding frequencies to current services. Some communities’ greatest need may simply be additional frequencies on existing routes to fill out service patterns and provide more connection opportunities at hubs. Developing more demand from a community through additional frequencies in the short term will help develop other new services in the long run. • Lowering fares/introducing competitive new service. Smaller communities tend to have higher average airfares than larger communities. Small airports may offer parking conven- ience and less congestion, but cheaper airfares are usually what attract passengers to par- ticular airports. Because leisure passengers in particular may be willing to drive several hours to access LCC service, the goal for many small airports is to keep prices competitive. • Improving service reliability. Flights are delayed and cancelled because of maintenance, weather, and congestion. Particularly at smaller airports that have fewer connecting flights, service reliability can become a major problem and cause travelers difficulty in reaching their final destinations. For an airport to retain passengers, it must have a reputation for reliable air service. Improving reliability can be a significant goal. • Up-gauging aircraft. The economics of the regional aircraft industry is changing as advancements in fuel efficiency, range capabilities, and operational performance influ- ence how small communities are served. Use of smaller turbo-prop aircraft and regional jets have been reduced in some longer-haul markets, but carriers will continue to need and use them in the foreseeable future. If a market assessment shows that services on 50-seat regional aircraft are under threat, a community may be able to support service with larger regional aircraft—even if it means less daily frequency. To be successful in attracting new air service, airports and communities next must exam- ine their goals critically to ensure that they are realistic. Otherwise, ASD teams are wasting time and money trying to achieve something that the airlines will not even consider. Communities must develop a compelling case that attracts the attention of airlines. Proposals for new services should be reasonably within the capabilities of a community to support in a manner that will be profitable for the targeted airline. Pursuing services that the community cannot support or that cannot be flown profitably will inevitably lead to disappointment—flights that will not survive long (if implemented at all) or provide few benefits to the community and the airline. ASD teams should determine what types of aircraft—in terms of capacity and range— would be appropriate for the proposed service. ASD teams must also ensure that those air- craft are compatible with the airport’s infrastructure—its jetways, tarmac, and runway length. Small communities may be more likely to attract new air service if its target market currently receives only connecting service. That is, if the target market is one where the new entrant air- line would be the second carrier offering nonstop service, the airport will likely have more dif- ficulty persuading the airline to start service, especially during difficult economic times. Selecting a Strategy and Techniques for Air Service Development ASD techniques can generally be divided into two broad categories: those designed to boost a carrier’s revenue through promoting passenger demand or ensuring that revenue achieves a minimum threshold, and those designed to induce carriers to supply air service by eliminating or offsetting some of their costs to launch new service. Although both can produce the same result in the carrier’s bottom line, different carriers expressed clear preferences for Summary 9

different types of incentives. Airports may also decide that they want to use both revenue and cost options. Chapter 8 describes a variety of ASD techniques, along with discussions of their advan- tages, disadvantages, case studies of where the technique was applied, and the situations in which they might be appropriate to be used. The techniques include the following: • Minimum revenue guarantees. Revenue guarantees are agreements that establish a target amount of revenue that a carrier will receive for operating a particular service to a partic- ular destination over a given length of time. • Guaranteed ticket purchases (“travel banks”). Guaranteed ticket purchase programs effectively ensure that the target airline will have passenger traffic worth a certain volume of revenue. Businesses or individuals deposit funds in a bank account that can be used only for purchasing tickets on the target airline during a given period of time. • Cost subsidies. Subsidies are a broad category of financial incentives that generally offset some aspect of an airline’s costs of operation. These subsidies can include waivers of fees or discounted landing fees during a promotional period. Cash subsidies are paid without regard to the amount of revenue that a carrier may generate during the agreed-upon period. Subsidies are generally a fixed amount, often with no connection to the eventual profitability of the route. • Marketing and advertising. Marketing is the most common form of ASD technique. Airports or communities usually purchase the marketing or advertising on behalf of the airline’s new service (for either an outbound or inbound market). Marketing is designed to build awareness for a new service and develop demand so that the service can become self-sustaining. • Non-financial (in-kind) contributions. “In-kind” assistance refers to products, goods, or services that otherwise might have to be paid for, but which can be donated by third- party providers instead. In-kind assistance can represent a significant value toward creat- ing and/or sustaining demand. Local stakeholders may be willing to provide in-kind assis- tance. For example, local advertising firms may provide billboards. Local media may provide newspaper or TV coverage. • ASD consultants. Air service consultants can be invaluable for smaller airports. Consultants can provide information on the industry to the airport manager, the ASD officials, the air- port board, and other local stakeholders. They can analyze changes in the local market over time and match that with developments in the industry. Air carriers typically have certain preferences in terms of incentives. Some prefer revenue guarantees. Others are mostly concerned with cost containment. ASD teams should under- stand those preferences when selecting ASD techniques and meeting with air carriers. One or more of the airports surveyed have used each of the ASD techniques discussed. As shown in Figure S.4, the most commonly used ASD technique is marketing aimed at inform- ing the community about new air service and discouraging passenger leakage. Most airports also provide direct subsidies to reduce carriers’ costs. Most also have hired ASD consultants to provide some analytic and presentation support. About half of the airports surveyed used minimum revenue guarantees. More non-hub airports than small hub airports used revenue guarantees, likely because those communities recognize that they need to share in the carriers’ financial risk of serving smaller markets. Making a Compelling Case for Air Service Almost all of the airports surveyed reported that they presented some sort of “business case” to the airlines they targeted. Small hub airports consistently tended to present more 10 Passenger Air Service Development Techniques Except in unusual circumstances, all smaller communi- ties will need to provide some sort of risk mitigation to attract new or enhanced service.

information than non-hubs airports. Figure S.5 summarizes the type of information that airports reported presenting to carriers. The route forecast is an important part of any proposal to a target airline. It builds on all the items noted above. It represents the airport’s best estimate of how successful the new service will be. It includes a proposed schedule, aircraft type, seating capacity, and seating configuration. The route forecast should also include a comparison of the proposed route to similar routes flown by the target airline. It indicates how the new service would compare to other services by that or another airline, what the operational and financial assumptions are, and whether it would be a meaningful contributor to an airline’s bottom line. Carriers surveyed acknowledged that communities need to be able to make a sound route analysis to demonstrate the potential viability of their routes. However, communities should understand that commercial air carriers are most interested in information they do not usually collect or to which they do not have easy access. (See Figure S.6.) Such infor- mation could include local economic and demographic data, details about local businesses and their travel habits, information about local civilian and military government facilities, and local tourist attractions that drive inbound leisure traffic. Airline planners reported that they most needed local economic and demographic data, as well as information on actual or potential market demand. Air carriers are particularly interested in the strength of local businesses together with their travel habits because business travelers are their preferred type of customer. Attracting airline service is an ongoing process, not a one-shot event. Making an initial contact with an airline at an industry conference, and then following up with the airline at a headquarters meeting, can be a fruitful approach. Securing air service may require a Summary 11 0% 20% 40% 60% 80% 100% Other Hired consulting firm Marketing Assistance -- Carrier Match Marketing Assistance -- No Carrier Match Direct subsidies Guaranteed ticket purchase Revenue guarantees Non hubs Small hubs Total Figure S.4. ASD techniques used by small airports. Carriers are most interested in information that they do not normally collect or to which they do not have ready access.

prolonged effort: a number of industry conferences and headquarters meetings may be required. Therefore, expectations should be adjusted accordingly. The airport should focus on 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. Most of the airports surveyed reported that they presented their cases to the airlines directly at headquarters meetings. A majority of small hubs also reported that they met with 12 Passenger Air Service Development Techniques 0 20 40 60 80 100 Other Business Travel Information Research on Leakage Demographic and Economic Data Projections or forecasts Route analysis Business case to airlines PercentSmall hubs Non hubs Total Figure S.5. Information that airports present to carriers. woLhgiH ytiroirPytiroirP 54321noitamrofnifoyrogetaC Economic & demographic data Actual or potential market demand Airport operating cost data Airport infrastructure (e.g., gates, runways) Slots or congestion Incentive programs Figure S.6. Kinds of information carriers are interested in.

airlines at ACI-NA’s annual “JumpStart” conference, but less than half of the non-hubs reported meeting airlines there. Presentations should be tailored to the type of meeting, whether an initial introduction at a conference or a longer and more detailed headquarters meeting. Strategically selecting the individuals to participate in the meetings is as important as the selection and presentation of the material itself. Normally no more than two individuals, the airport manager and the ASD consultant, should participate in meetings at conferences. Three or four individuals typically participate in headquarters meetings. The airlines we sur- veyed stated that the mayor and other elected officials as well as representatives of the local Chamber of Commerce should not participate in meetings as they typically add no objec- tive substance to the discussion. Follow-up and ongoing participation in industry events and conferences is critical to establish and maintain relationships and remain on the “radar screen” of airlines. It is important to gauge the level of interest of an airline in serving the airport and adjust goals and strategies accordingly. Once an airline has firmly established an interest in serving the airport’s market, and per- haps even proposed a start-up date for the services, some negotiations may be necessary to agree upon the final details. Those details usually hinge on how to minimize costs and sup- port marketing efforts. Evaluating and Refining the Program The final aspect of effective ASD programs concerns an evaluation of the ASD team’s efforts. Such an assessment provides a systematic and unbiased review of the methods and procedures used, as well as the results obtained. The evaluation step is often overlooked as part of any program, but sound program management requires an assessment to improve and build on past efforts. Measuring the effectiveness of an air service initiative is conceptually straightforward but can be very difficult to do well. There are three basic components needed to determine whether an ASD technique worked effectively: • Knowing the objectives exactly. Knowing exactly what the goals were is critical to being able to assess the extent to which they have been achieved. The more commonly used ASD objectives or goals—such as gaining service to a new hub—are easily assessed. The ser- vice started or it did not. (Whether it is sustained is a separate dimension.) Less concrete goals—such as “decreasing the amount of passengers leaked”—are difficult to assess. Has an airport achieved its objective if passenger leakage declined from 60 to 55 percent? The goal itself should be better defined. It would be better to set a goal of reducing leakage by some specific amount (e.g., from 60 to 45 percent). • Measuring outcomes. With the more common goals and objectives noted above, meas- uring the eventual outcomes is relatively simple. Most operational data (e.g., departures, enplanements) provide good metrics of the extent to which the ASD program achieved the goal. It is also important to examine passengers’ reactions, which provides feedback on whether the assumptions used in the business case were on target (e.g., whether the new service stimulated new travel). Similarly, keeping in mind the importance of main- taining existing service, the effects of any new ASD efforts should also be checked against incumbent carriers’ operating results. Roughly half of the airports surveyed reported that they also tracked the financial effects of their ASD efforts. Measures were both revenue and cost related. For example, several Summary 13 Sound program management requires an evaluation to improve and build upon past efforts. Measurement allows for improvement.

airports tracked parking revenues and spending on concessions that correspond with changes in enplanements. • Attributing causation. Airports and communities naturally want to attribute positive outcomes to their efforts and negative outcomes to external events. Yet because airline finances and operations are so closely related to national economic conditions, any sig- nificant change in an airline’s costs—or any major external event that may affect passen- ger demand and revenues in a market—can cause airlines to react in different ways. For the types of evaluations generally of interest here, caution is urged in claiming total credit or accepting all of the blame. Finally, keeping key stakeholders informed about the results of an airport’s ASD efforts helps ground their expectations in the progress achieved. Analyzing the results will also help the ASD team consider whether alternative ASD techniques might be more effective in the future. 14 Passenger Air Service Development Techniques