Effects of Airline Industry Changes on Small- and Non-Hub Airports (2015)

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142 C H A P T E R 7 7.1 Introduction This chapter synthesizes the lessons learned from the case studies and focus groups. Addition- ally, analysis of key variables related to the success of ASD efforts are presented to support the lessons learned. The lessons learned presented here will be used to develop strategies for air service development at small- and non-hub airports presented in Chapter 9. 7.2 Overarching Lessons Learned • Air service development is relative. Air carriers do not choose new routes in a vacuum but through a comparative analysis of likely route profitability across communities. A major area of discrepancy between small communities and air carriers is an understanding of the threshold needed to begin new service or to keep existing service. In many small com- munities, the prevailing view is that if a route can earn a profit by the end of a 2- to 4-year initial period where the airport offers an incentive package, then the route should make financial sense to the air carrier. However, given recent changes in the structure of the airline industry, carriers have focused on capacity reduction by offering fewer flights and filling those flights with more passengers to return to industrywide profitability. Therefore, before a carrier will commit its increasingly scarce asset (an aircraft) to a community, it must examine not only whether a par- ticular route is profitable, but also how profitable it will be compared to other potential new or existing routes. The challenges to small communities are twofold: they are increasingly compet- ing against one another (through incentive packages) for increasingly scarce service while also having to demonstrate market demand for new routes on larger aircraft. • Although incentive programs can influence air carrier decisions at the margins, local economic growth and market demand are the factors most likely to influence air carrier decision-making. While much of the attention in small communities is on the development of incentive packages to “lure” air carriers to their airports, local economic growth and market demand are the major factors that influence whether an air carrier will begin new service at an airport. Exhibit 7-1 illus- trates the results of the survey of airline officials on the importance of market demand and incen- tive programs. The influence of economic growth on air service development was most evident in Fargo, ND (FAR), where the main impetus for the growth in air service over the past 10 years has been the region’s drastic and sustained economic growth. The diversity and scale of employ- ers in the Fargo region has led to demand for air service to several domestic and international destinations. Furthermore, because of the number of business travelers and Fargo’s high per capita income, the region is very attractive to air carriers because of the potential yield per flight. Lessons Learned

Lessons Learned 143 • Many of the factors that determine whether an air carrier will start new service in a com- munity are out of the hands of airport and community leaders. Unfortunately for many airport managers and local officials in small communities, many of the factors that determine whether an air carrier will start new service (or end existing service) are out of their hands. In the ever-evolving airline industry, macro-level events such as mergers, a spike in fuel prices, a terrorist attack, downsizing of a hub, or fleet realignment can drastically affect the current and future profitability of a route. This poses a significant challenge for local leaders and airport managers when explaining unsuccessful ASD efforts to their communities. This challenge was most evident in Redding, CA (RDD), where, under the leadership of the airport manager and the local economic development director, the local community has con- tributed over $1,000,000 in pledges for a travel bank and minimum revenue guarantee to attract a new carrier to the airport. Despite a very active community and an innovative approach to incentives, RDD has been unsuccessful in attracting new service for various reasons including an internal policy at United Airlines that prohibits overflying a hub (San Francisco in this case) when flying to a destination (such as Los Angeles or San Diego). • Due to industry capacity reductions and the competitive nature of air service development, a focus on retaining existing air service can be an effective strategy. While many communities focus on attracting new service to their communities, retaining existing air service given the competitive nature of air service development in small communities is an effective strategy. Given that most airports have experienced substantial declines in flights since 2001 (Exhibit 7-2), simply breaking even with current levels of air service can be considered a “win” for a local community. Officials at FAR noted that they are focused on retaining the ser- vice they have worked to attract. Specifically, the airport manager noted that they have an appro- priate amount of air service for the community and, outside of a few specific routes driven by individual businesses, that they have service to the top-demand destinations in their market. In a rather extreme case of protecting existing air service, community officials in Sonoma County have worked to protect Alaska Airlines service at STS by refusing to offer community-based incentives such as travel pledges to Delta which wanted to compete against Alaska on a flight to Seattle. Finally, the Burlington (BTV) case study illustrated how an airport can look to build its existing relationship with a carrier when looking for new routes. A retention strategy does not mean resting on your laurels, but rather maintaining constant communication with community organizations and conducting rigorous analysis of existing service and passengers to best suit the needs of the carriers and the community. Exhibit 7-1. The importance of market demand and incentive programs.

144 Effects of Airline Industry Changes on Small- and Non-Hub Airports • When deciding whether or not to initiate an ASD program, communities must weigh the cost of the initial investment in incentives for new air service with the likelihood that their market can sustain the service once the incentives end. Before beginning an ASD effort, a community must assess if current and future local market demand can sustain service and reduce the risk of losing the service given the cost of the initial investment in an incentive package. A community must conduct a realistic and thorough market analysis of future economic or tourism growth that guides their decision-making when it comes to investing local public and private money in incentive programs. In fact, many air carriers noted that they would like communities to provide them with local economic development and tourism devel- opment plans when trying to attract new service. If the long-term growth projections of a community do not make a new route profitable without incentives, then it may not be worth the investment of funds to attract a carrier for a flight that is not sustainable. The Asheville (AVL) focus group illustrated the internal decision that a community must make when deciding to start an incentive program. Many business leaders felt that they had an adequate level of service for the size of the community and were hesitant to invest in an incentive program that would not pay for itself in the long run. The Kansas (ICT) case illustrates how ASD programs can be sustained by state general fund appropriations. As the evolution of the source of the revenue guarantees demonstrates, local government funding for subsidies may not be a sustainable ASD strategy. The involvement of the State of Kansas in providing the bulk of these subsidies has helped to reduce the overall burden on the City of Wichita and Sedgwick County. However, the ability of the State of Kansas to insti- tute KAAP was largely due to the fact that ICT’s catchment area covers two-thirds of the State of Kansas. A similar program might be more difficult to implement in a state with several competing small- or non-hub airports looking to supplement their local incentive packages with state money. 7.3 Air Service Development and Local Economic Variables • There is little connection between air service growth and population growth; however, there is a stronger connection between air service growth and regional employment change. The limited literature that explores the connections between economic development and air service development suggests that the relationship is one described by a “chicken and the egg” Exhibit 7-2. Change in flights by airport hub group (2001–2013).

Lessons Learned 145 dilemma—Is it population and employment growth that drives the demand for new air service or vice versa? Exhibit 7-3 illustrates the relationship between population growth and available seats in the case study and focus group communities. The exhibit shows a very weak relationship between a region’s population growth and air service development. Specifically, of the 11 (out of 12) regions that experienced population growth from 2001 to 2013, 6 gained available seats in the market over the same period as 5 lost seats. Also, while some of the regions with the largest population increases gained seats (Bozeman, MT, and Fargo, ND), the largest gain in seats from 2001 to 2013 was by Sonoma, CA, which had a much more modest increase in population. Exhibit 7-4 shows the relationship between employment change and seat availability from 2001 to 2013. The exhibit shows a much stronger positive relationship between employment change and seat availability with some limitations. Some of the locations with the largest increases in employment from 2001 to 2013 (i.e., Fargo, ND; Panama City, FL; and Bozeman, MT) also had some of the largest increases in available seats. Additionally, some of the regions with the largest decreases in employment (e.g., Toledo, OH, and Redding, CA) also experienced the larg- est decreases in seat availability. However, there were a few exceptions to the rule (e.g., Akron- Canton, OH, and Sonoma, CA) where employment decreased but seat availability increased. The Akron-Canton increase is largely explained by its position as a low-cost alternative to Cleveland Hopkins Airport while Sonoma’s better-than-expected performance is largely tied to its strong relationship with Alaska Airlines. • An indirect benefit of local economic development projects is the building of market demand for ASD efforts. As communities with small- and non-hub airports explore ASD opportunities, it is impor- tant to keep in mind that any effort to attract or retain service is enhanced by successful local economic development projects that result in increased market demand. Therefore, airport and community officials should assist and coordinate with local economic development officials on possible business relocation efforts that may generate new demand for air service in a region. Additionally, in communities with limited market demand, initially investing in economic Exhibit 7-3. Population change and seat change (2001–2013). 0% 5% 10% 15% 20% 25% Population Change 2001-2013 -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% Se at C ha ng e 20 01 -2 01 3 TOL RDD MRY BTV AVL ICT BZNAGS FAR CAK ECP STS

146 Effects of Airline Industry Changes on Small- and Non-Hub Airports development rather than air service incentives may be an effective strategy to building demand that leads to new service. • Local economic development strategies that focus on limited or sustainable growth can be successful in attracting new service. An interesting lesson learned from the Sonoma focus group was that strong tourism demand can balance a desire for limited or sustainable economic growth when looking to attract new air service to a region. Consistently, there is a desire from local residents and business leaders to engage in sustainable economic growth that limits the potential growth of local “out-bound” market demand. However, Sonoma has been successful in ASD efforts by investing significant public funds in the Convention and Visitors Bureau, which actively markets the Sonoma region in cities across the United States to drive “in-bound” demand for air service. In Monterey (MRY), the community has gone a step further by resisting any new ASD efforts that bring additional tourists to the region and threaten the quality of life enjoyed by local residents. This approach has resulted in a decrease in seats and flights at MRY. • As communities look to organize and develop ASD efforts, alternative modes of transpor- tation that take passengers to larger hub airports are an effective way to build community support for the local airport. In many communities, airport officials struggle to engage the public and remind citizens that their local airport exists. As airport and local officials work (often behind the scenes) to attract and retain air service, a way to get local residents in the habit of checking fares from the local airport is to support or develop coach bus service to a larger hub airport (if applicable). The most consistent finding from all of the case studies and focus groups was that local residents would rather fly from their local airport rather than a larger hub because of the conveniences of a smaller airport (e.g., ease of dealing with security and availability/cost of parking). While offering bus service from the local airport to a larger hub may seem counterintuitive, it offers several benefits to the local airport including increased parking revenue, greater traffic through the terminal, and increased visibility for the airport. In Sonoma, the Airport Express bus -10% -5% 0% 5% 10% 15% 20% 25% Employment Change 2001-2013 -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% Se at C ha ng e 20 01 -2 01 3 TOL RDD MRY AVL ICT BZNAGS FAR CAK ECP STS Exhibit 7-4. Employment change and seat change (2001–2013).

Lessons Learned 147 service was an important way to remind local passengers of the service offered at STS. Although passengers may not choose STS every time they travel, they may opt to avoid the 1- to 2-hour bus ride to San Francisco to enjoy the convenience of flying from STS. Finally, bus service can provide an important redundancy for local communities when flights are cancelled or delayed due to irregular operations at larger hubs—a common problem for many small- and non-hub airports. 7.4 The Origins of ASD Efforts • ASD efforts at small- and non-hub airports often originate from a lack of community sat- isfaction with existing destinations and the reliability of existing flights due to weather cancellations at larger hubs. In many communities with small- and non-hub airports, the reliability of the small number of existing flights is a major concern given that when there are weather delays or cancellations, there are often few options to rebook or accommodate passengers. Many ASD efforts originate in response to a community’s or a specific business’s concerns over the reliability of existing flights. In communities such as Toledo, Asheville, and Redding, focus group participants noted that the primary reason that they no longer fly from their local airports is because of concerns over reliability. Many business owners noted that when traveling, they would rather incur the extra cost of driving, parking, and flying from an alternative larger hub airport than risk missing their meeting due to a weather cancellation. The desire to attract additional service to mitigate the effect of irregular operations was a significant driver of ASD efforts. • Communities are willing to invest in ASD efforts because they value the traveling experience at their local airport and can often quantify the total cost of flying from a competing airport. While many community members expressed dissatisfaction with the reliability and variety of destinations from their local airports, they expressed a desire to fly from the local airport due to the expedited and convenient traveling experience that a smaller airport offers. The ability of passengers to avoid costs associated with driving to larger hub airports (e.g., fuel, parking, and loss of productivity due to traveling) is a major driver of business involvement in develop- ing incentive packages such as travel banks and minimum revenue guarantees. However, as the Toledo focus group illustrated, the presence of a close large- or medium-hub airport that offers low-cost flight options (in this case Detroit) can limit community support for a local airport. • Losing all commercial air service at a small- or non-hub airport will often galvanize com- munity support for ASD efforts if airport managers can communicate the effect of the loss of service on the economy and the region. When STS lost all commercial service in 2001, many members of the community noted that they did not know what they had until it was gone. The unpredictability and inconvenience of the drive to SFO coupled with the rapid increase in tourism in the region led the Sonoma County Board of Supervisors to act quickly and decisively in hiring an energized airport manager and creating the AAC. The AAC, led by the airport manager and a local supervisor, worked to galvanize support in the community by meeting with state and federal elected officials as well as business owners. 7.5 Assembling a Community ASD Coalition • A community champion with a good reputation among the business community (prefer- ably from the EDC, CVB, or Chamber) is necessary to unify and take ownership of a region’s ASD efforts. FAA grant assurances often limit the role that an airport manager can play in coordinating community-driven ASD efforts. Therefore, identifying a community champion who understands

148 Effects of Airline Industry Changes on Small- and Non-Hub Airports the airline industry and who has a strong reputation among community and business groups is essential to ASD efforts. In Redding, the reputation of the President of the EDC of Shasta County among the business community led to an instant sense of trust among investors who donated funds to the travel bank. In his role, the EDC President could connect with business owners and explain the economic necessity for growing air service at the airport. In Fargo, the President of the Greater Fargo/Moorhead Economic Development Corporation was actively involved in working with the business community and the airport manager in developing and coordinating ASD efforts. • A formal airline attraction committee is an effective governance structure to ensure the leadership and organization of community ASD efforts. A common problem for many communities is organizing multiple air service attraction efforts within a community. The Sonoma focus group illustrated the importance of a formal airline attraction committee within a community. The AAC in Sonoma was responsible for garnering political support from elected officials, working with local businesses to secure contributions to the ticket bank, and working with local media outlets to provide in-kind support for marketing of new air service. These tasks, daunting for any airport manager to handle alone, were manage- able due to the committee structure within the AAC and the diverse membership of the group. Also, the AAC in Sonoma illustrates the fact that once a committee is established, it can provide the foundation for sustained ASD efforts. • Single-business led ASD efforts still need larger community support to be successful. In many small communities, much of the market demand may be the result of the travel needs of one or two large companies. The case studies of Panama City, FL (ECP) and Bozeman, MT (BZN) highlight this point. At ECP, the St. Joe Company was willing to provide a minimum revenue guar- antee to Southwest Airlines to attract new service at the airport to raise the value of the surrounding land that the company hoped to develop. However, without the imposition of the 1% hotel bed tax to provide a dedicated funding stream to allow the CVB to market all LCC service at ECP, it is unlikely that the service would have been as successful as it was for both St. Joe and Southwest. At BZN, the collaboration between Big Sky Resort and the Yellowstone Club served as the impetus for engaging the Bozeman Area Chamber of Commerce, the Bozeman CVB, and other business enti- ties. Without the cooperation of these two groups, it is unlikely that there would have been enough collaboration to apply for and receive the $950,000 SCASD grant from the DOT. Because the efforts of these groups have been so successful, both the ASD efforts and the air service itself have been self-sustaining and have led to BZN becoming one of the fastest growing airports in the country. • In some cases, building in-house airport capacity for ASD efforts is an effective strategy. While many small- and non-hub airports rely on consultants to develop and coordinate pieces of their ASD strategies, it may be beneficial for airports to hire marketing or ASD specialists to enhance their efforts. Akron-Canton (CAK) illustrated the importance of having in-house mar- keting capacity to lead a sustained brand development and promotion campaign that has resulted in the effective marketing of several new routes including those operated by Southwest Airlines. Additionally, the Asheville focus group highlighted the important role that an airport employee dedicated to air service development can play in coordinating airport and community ASD efforts. 7.6 Identifying an Air Carrier and New Destinations • Community outreach and education are critical first steps to identifying local demand for service to a new destination and setting expectations. A difficulty faced by many airport officials is that they must continue to try to garner support from businesses that will often have their employees drive to other airports for their travel needs

Lessons Learned 149 and then publicly denounce the local airport for a lack of flight options. In these cases, airport officials must work to educate the community on the importance of business and community support for new service in today’s competitive ASD environment. The first step for a community facing a difficult ASD environment is to proactively educate the community on the benefits of flying locally and also on larger airline industry trends that will affect the community’s ability to attract service. Airport officials should consider investing in studies and economic analyses that show business and community leaders the value of flying from the local airport versus driving to a nearby airport. In the case of TOL, both economic development and business officials noted that they would like to know the true cost of traveling from Detroit versus Toledo, taking into account lost local jobs, tax revenues, and so forth, before choosing where to fly. Additionally, air- port and local economic development officials must educate the community through meetings with community groups, public forums, and media appearances on airline industry trends such as consolidation and fleet realignments that ultimately affect the success of the community in gaining new service. This proactive educational program will enable the airport and community to set realistic expectations for service gains while allowing airport officials to focus on meeting with air carriers rather than repeatedly defending their actions to the media and community. • Airport managers and consultants must identify and target an air carrier whose business model (e.g., route network, fleet, and regional presence) matches the local demand for service. When asked what communities can do better in trying to make the case for new service, airline network route planners responded that communities need to do a better job understanding the individual business models of each carrier and how their community’s market demand profile fits (or does not fit) within that business model. The Sonoma case illustrates the importance of communities matching their local demand for air service with the business model of an air carrier. STS’s 5,020-foot runway limited the type of aircraft that could service the market and, by default, limited the carriers that could serve the airport. Additionally, the airport’s consultant provided valuable market analysis data that identi- fied the top destinations (i.e., LAX, SEA, SAN) of travelers from the Santa Rosa area. Using these pieces of data, the AAC targeted Alaska/Horizon as their preferred carrier because of the airline’s west coast presence and the carrier’s use of the efficient Q-400 aircraft. More important, because Alaska Airlines (more so than any other carrier) placed great stock in travel banks as a measure of community support and demand for service, it was a great match for the political environment of the North Bay’s citizens who supported collaborative programs like ticket banks more than minimum revenue guarantees. • Different segments (business vs. tourism) of a region’s population may have varying per- ceptions of ASD needs. One of the major challenges a community faces in establishing an ASD program is getting agreement on the air service needs from different segments of the community. One of the most important lessons illustrated by the Asheville case is that different organizations and businesses within a region may have different perceptions of air service needs. The business and tourism communities in Asheville had differing views on both new service destinations and the overall need for new service at AVL. This is particularly interesting given that the Asheville Area Cham- ber of Commerce, the Economic Development Coalition, and the Asheville Convention and Visitors Bureau are all part of the same umbrella organization. The lack of cohesiveness could be attributed to the fact that many of the economic development officials have been in their current positions for less than 5 years. Finally, the Asheville case illustrates the importance of regular and formal communication among the airport, Chamber, EDC, and CVB on ASD efforts. Without a mechanism currently in place in Asheville, there is a lack of consensus on what destinations the community should try to target for future ASD efforts and the benefit that such efforts would

150 Effects of Airline Industry Changes on Small- and Non-Hub Airports have on the community. Whether a market is primarily a “business” or “tourism” destination has little bearing on the success of ASD efforts (Exhibit 7-5). 7.7 Developing an Incentive Program • An incentive program for new service should focus on reducing short-term risk and costs to air carriers while protecting the interests of the community. In the survey of airline network route planners, several participants noted that incentive pack- ages offered by communities should be designed to reduce the short-term risk and costs to the air carrier associated with starting new service in a community. When a carrier begins new service in a community, there are several risks to the carrier including a lack of enplanements due to a lack of marketing, the cost of opening a new station at the airport, and the cost of moving or hiring new employees for baggage, ticketing, and ramp operations. Incentives such as ticket banks or minimum revenue guarantees are designed to offset these costs and risks over a short time horizon. As the case of Panama City (ECP) illustrates, minimum revenue guarantees are an effective tool to reduce the financial risk to carriers during the first years of service. The ECP case also illustrates the importance of properly structuring revenue guarantees to protect the interests of both parties. Both Southwest and St. Joe could exit the agreement if the service was so unsuc- cessful that either party incurred a significant financial burden. Also, the inclusion of a provi- sion for profit sharing between Southwest and St. Joe if a revenue guarantee payment was made protected St. Joe from losing millions of dollars in one or two quarters and having no way of recouping payments when the route was profitable. One of the largest risks a carrier faces is opening a new station at an airport. The Augusta (AGS) case highlights several ways to reduce a carrier’s start-up risk when opening a new station including providing above- and below-the-wing ground-handling by the airport and developing an innovative hourly cost structure for new entrants with few daily flights. By hiring an ex-airline -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% Se at C ha ng e 20 01 -2 01 3 MRY RDD AGS CAK ECP FAR BTV BZN TOL STS AVL ICT Primary Destination Type Business Tourism Exhibit 7-5. Seat change (2001–2013) by primary destination type.

Lessons Learned 151 station manager to operate the airport’s ground-handling service, AGS provided a valuable ser- vice to new entrant airlines that reduced their risk at a relatively small cost to the airport. • Community-driven incentive programs signal to air carriers a community’s commitment and demand for new service. Incentives based primarily on SCASD funds signal weak com- munity support. The Small Community Air Service Development (SCASD) grant program is an important resource for communities with small- and non-hub airports looking to attract or retain air service. As part of the application process for the SCASD program, communities must match requested federal money with in-kind and cash contributions from the airport, businesses or local government agencies. A SCASD grant is an effective complementary tool to leverage exist- ing community-driven air service development efforts. Although many of the communities that have seen seat increases since 2001 have received a SCASD grant, an equal number of recipients have lost air service during the same period (see Exhibit 7-6). In many cases, communities rely too heavily on the SCASD grant as a proxy for community support. As the Toledo focus group illustrated, a SCASD grant of $750,000 and over $1,000,000 total in funds for an airline incentive package do not necessarily mean that the community supports an airport’s efforts to attract new service. In the case of Monterey, CA (MRY), the local community was reluctant to provide funding for a travel bank or revenue guarantee due to political concerns about the continual subsidization of air service. However, the airport was awarded a SCASD grant for $500,000 to provide a revenue guarantee to a carrier—even though the community opposed the local subsidization of air service. As these cases illustrate, the SCASD grant program is a complement, rather than a substitute, for community-driven incentive programs. • Incentives are a complement, not a substitute, for underlying local demand. There is no “silver bullet” incentive—communities should use a mix of incentives including cost abatement, minimum revenue guarantees, ticket banks, and marketing assistance. -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% Se at C ha ng e 20 01 -2 01 3 MRY RDD AGS CAK ECP FAR BTV BZN TOL STS AVL ICT SCASDP Grant Recipient No Yes Exhibit 7-6. SCASD grant and seat change (2001–2013).

152 Effects of Airline Industry Changes on Small- and Non-Hub Airports Although much of the focus of ASD efforts is on incentive programs, there is no one particu- lar incentive a community can offer to an air carrier that can overcome subpar market demand. However, to be competitive with communities with similar market characteristics, a region may have to use various incentives to attract new service. An important lesson from the Kansas case, particularly during the initial Fair Fares program, was that providing a combination of incentives such as travel banks, revenue guarantees, and marketing money is an effective way to gauge the support of the business community while demonstrating the potential strength of a route to a carrier. Carriers view incentives differently in each market. For example, despite $4.7 million in travel pledges, AirTran did not begin service in Wichita until the city put a $4.5 million revenue guarantee on the table. However, in Sonoma, Alaska Airlines expanded their route offerings at STS with an incentive package composed primarily of a travel bank and without assistance from a minimum revenue guarantee. Exhibits 7-7 and 7-8 illustrate the vary- ing degrees of success of travel banks and minimum revenue guarantees in increasing available seats in a market. 7.8 Meeting with Air Carriers and Community Leaders • Airport managers must be selective in who represents the community at airline meetings. Communities must be selective about who pitches their community’s ASD proposal at an air carrier’s headquarters. The Augusta (AGS) case illustrates the potential negative consequences of inviting local elected officials who are unfamiliar with the airline industry. During a meeting with Delta, the mayor “pointed fingers” at company officials for their lack of support for small Georgia communities. As the AGS case also demonstrates, once an air carrier forms a negative impression of a community, it can take several years to regain a positive impression. • Airline network route planners find information on a community’s economic development plan, tourism development, and untapped market demand influential during meetings. -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% Se at C ha ng e 20 01 -2 01 3 MRY RDD AGS CAK ECP FAR BTV BZN TOL STS AVL ICT Travel Bank No Yes Exhibit 7-7. Availability of a travel bank and seat change (2001–2013).

Lessons Learned 153 The survey of airline network route planners found that the most influential information that a community can present during a meeting with airline officials is economic development and tourism plans along with an analysis of untapped market demand. Specifically, communities need to demonstrate how their local economic development and tourism plans, if carried out to their full extent, will result in additional market demand. Additionally, air carriers want to know specific projections for corporate travel for existing businesses based on growth projections for individual companies. These sources of data will help the air carrier determine the long-term profitability of a potential route once the short-term incentive packages end. 7.9 Ensuring the Sustainability of ASD Programs and New Service • A key to sustaining ASD efforts is for the airport manager and community groups such as the EDC, CVB, and chamber of commerce to develop a close working relationship. One of the most important lessons to emerge from the case studies and focus groups is that in order to sustain ASD efforts, local officials must remain engaged in attraction and retention efforts. The most successful example of a sustained ASD campaign was in Fargo (FAR). The close working relationship of the airport, Greater Fargo-Moorhead Economic Development Corpora- tion, the Chamber of Commerce of Fargo-Moorhead and West Fargo, and the Fargo-Moorhead Convention and Visitors Bureau has been the key to FAR’s ability to use the region’s economic growth to attract new air service to Fargo. By partnering with these community groups, the airport has overcome traditional limitations on air service development such as the FAA’s AIP grant assurances by developing a flexible airline attraction program that provides incentives to carriers. In addition, by being in constant communication with these organizations, the airport has access to real-time information on the needs of the business community and can address any concerns through an organization’s regular meetings. -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% 160% Se at C ha ng e 20 01 -2 01 3 MRY RDD AGS CAK ECP FAR BTV BZN TOL STS AVL ICT Revenue Guarantee No Yes Exhibit 7-8. Minimum revenue guarantee availability and seat change (2001–2013).

154 Effects of Airline Industry Changes on Small- and Non-Hub Airports • Once new service is started in a region, the community must work to market and support the flight to ensure its success. A consistent theme that emerged from several of the case studies and focus groups was that many involved in ASD efforts believe that, if they are successful in attracting new service to their airport, the community will support the new service. However, the real work of air service development begins the day the first flight arrives at the airport. Throughout the case studies and focus groups, communities worked to support new service in several ways. In Bozeman (BZN), the airport manager emphasized keeping the cost per enplaned passenger (CPE) as low as possible for air carriers by finding new ways to run a lean operation. In Panama City, the local community passed a 1% hotel bed tax increase to fund marketing for Southwest Airlines ser- vice. At CAK, airport officials developed grassroots marketing campaigns (#LUVCAK) to raise awareness among travelers of the switch from AirTran to Southwest while branding their airport as an alternative to Cleveland Hopkins. Communities must have a detailed plan for supporting potential new service that includes a marketing strategy (either in-house or an external consul- tant) along with a funding stream to support that strategy. Finally, the community should be clear on how it plans to continually engage the business community in a dialog about continued support and retention efforts. • Continuing education of the community on airline industry trends and route performance by airport officials and key community leaders is key to sustaining ASD efforts. A common trait among airports and communities that have had sustained success in ASD efforts is that they continually educate the community on airline industry trends and potential opportunities for attraction efforts. In Burlington (BTV), airport officials meet monthly with local business and civic leaders to discuss ASD efforts and to drive support for new routes such as their new Atlanta service on Delta. Fargo (FAR) exemplifies the importance of continual engagement and education of the community. The close relationship of the airport, the EDC, the CVB, and the Chamber has helped to educate businesses and citizens in the region on the economic importance of air service and on larger airline industry trends that affect service at FAR. By meeting frequently and having congruent goals and expectations, Fargo can act quickly when a new air service opportunity presents itself.