HomeMy WebLinkAboutPROPOSAL - AIR SERVICE DEVELOPMENT PROGRAM )-sis
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Proposal under the IDOT FY 2005 Air
Service Development Program
Submitted February 17, 2005
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ATERLOO
? EGIONAL AI -
CRUISE A NEW ALTITUDE
Table of Contents
Pagl
Executive Summary 2
Overview 3
Immediate Need to Maintain or Attract Air Service 4 - 6
Outline for Use of Funds & Intended Impact on
Retention or Attraction of Air Service and Associated Timeline 7 - 8
Overview of Marketing Funds 9 - 10
Community Commitment 11 - 12
Legal Sponsors and Airport Information 13
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Executive Summary
Executive Summary
• Waterloo-Cedar Falls is underserved. On a per capita basis, ALO has 1/3 the
departing airline seats as similar sized cities. Since 2001, ALO has lost 2 of the 3
carriers that have historically served ALO.
• Tied to this, ALO airfares are higher (and have increased faster) than other
regional airports such as CID & MLI.
• Due to the aforementioned lack of service & relatively high airfares, ALO suffers
significant "leakage" — locally booked traffic that drives to originate air travel at
regional airports such as CID & MLI. Today, only 37% of passengers booked
from Waterloo-Cedar Falls use ALO as their origin airport.
• Waterloo-Cedar Falls has been aggressive in attempting to improve air service,
with the following initiatives taking place since 2002:
o Commitment of$3.3 million to air service - $1.0 million in the form of an
airline revenue guarantee and $2.3 million for terminal renovations.
o $550k of marketing support for current ALO air service.
o Development of a public-private partnership that has developed a strategy
to improve air service.
The result has been that Northwest Airlines recently upgraded two of their six
daily ALO flights to jets —ALO's first jet service since the late 1990's. More
importantly, this upgraded jet service has been successful and Northwest's
service increase has been profitable. •
• But more needs to be done, as ALO is still woefully underserved for a market of
its size. Given that, ALO is requesting additional monies from this grant to help
add more air service.
• This proposal is based on using state IDOT funds to leverage current and
proposed federal and local funds to improve air service. Due to the recent
jet service success in ALO and likely continued improvement, we believe
these funds will show "Return on Investment"for the IDOT and establish a
success story on which IDOT can use to obtain future funding for like
programs. All marketing funds will be used to promote several key factors:
new jet service, lower fares, and more service.
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Overview of Waterloo-Cedar Falls &
Review of ALO Air Service Trends
Overview of Region
The Waterloo-Cedar Falls Airport (ALO) serves
63
northeast Iowa-for the most part reaching eastward •65• '218 s' 9 wr.
Decorah
toward the Mississippi River, westward to Interstate Mason City aam '63,. MississippiR.
35 & northward to the Minnesota/Iowa state line. > .Chats City 5C 521 1 .Erfic,,Mounds t
18 ]H
While Waterloo itself consists of 69,000 people, 65, 216 .63a .18 150.
when including sister city Cedar Falls, 177,000 3,, ' . 3 52,
people reside within a 25-mile radius of the airport. P 65 "a - • 3' '3, j52',
zo edar Fall 20 Dyewille Du
When looking at a 50-mile radius, the ALO 'Iowa• ateri°'
Manchester •20
catchment area is 369,000 people. 65 Iowa R. 5
'63 1511
•. Anamosa 461.`.
y+ , Vinton �vlaquoke
es ,Marshalltown :218 anion 751 64 ■ •
• _ G 30 l 3D• 30 Cedar Rapids Ma uoket
1 330 �151' '.. 61
T SPW +MGWJ
The FAA certified Waterloo Regional
+FOD - 4L0 Airport is a fundamental asset to the
+SUX „�.,�, ,,, 1 f6� metropolitan area and the
So�«.0767)9 .0 surrounding communities. There are
many businesses and educational
+DSM Al,"lae" institutions in this area such as the
UUhM'!w(1.68 John Deere Company and the
07 University of Northern Iowa (13,000+
BR` students), which could benefit from
improved air service. Low airfares
can generate many new trips. Local citizens, who are currently deprived of the low
airfares offered at the larger airports, will be once again able to travel by air.
Economic development in the region requires access to convenient and competitive air
travel. The federal government, with state and local taxing bodies, has made a
substantial investment in the Waterloo Regional Airport. Local communities and
companies have made certain commitments to fly out of Waterloo. Because of the new
developments, the area now has more potential than ever before to generate air travel.
IDOT funds coupled with local funds and strategies in place will create a favorable
environment to enhance air service. Once the desired travel conditions are created, the
generation of new traffic and the consequent development and growth will keep the
airlines in this area. This way, the public investment will be leveraged properly.
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Immediate Need to Attract and Maintain
Air Service
Maintaining and Attracting New Service
Waterloo-Cedar Falls (ALO), a community of 177,000+ people (within a 25-mile radius;
369,000 reside within a 50-mile radius), is underserved: only one airline (NW Airlink to
MSP) currently serves ALO with six daily flights. Because of this, ALO is overpriced:
ALO fares have risen significantly since 1990 and are currently higher than other
regional airports that ALO competes with (CID, MLI).
Waterloo Regional Airport conducted a catchment area analysis in June of 2002. From
this study, it was found that ALO only retained 37% of catchment area bookings and
since then, ALO has lost two of the three carriers that served the market during that
time period (indicating ALO "leakage" is much worse currently).
Of Waterloo-Cedar Falls bookings, 29% are driving 90-120 minutes to another airport
for their travel. Another 34% drive 2+ hours for their air travel purposes. Improved air
service would benefit many residents, but particularly the area's #1 employer (John
Deere) and Division 1A school-The University of Northern Iowa.
Waterloo-Cedar Falls has committed almost $3.3 million to the support of additional air
service: $1.0 million in "airline guarantee agreements," and $2.3 million in airport
terminal renovations. These commitments were key to recent air service improvements:
Northwest has increased capacity 25%, and more importantly, NWA traffic at ALO
increased 71%.
Waterloo-Cedar Falls has formed a regional wide public-private partnership, the Air
Service Task Force (ASTF). The ASTF is comprised of government and business
leaders (from all over northeast Iowa) to ensure full community involvement and to form
a collective strategy on improving air service for all of northeast Iowa.
Since 9/11 ALO has lost: 1) twenty airline jobs 2) $750,000 of annual economic
impact 3) two airlines (American Connection & United Express) 4) 40,000 total
airline passengers. If there is not an investment by the City of Waterloo, State of
Iowa, and the US DOT further declines will continue to erode the financial
position and economic development of the region.
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ALO is underserved and overpriced
•
ALO Enplaned Passengers by Carrier:Annualizes
80 elle .._
74 000 ®AA ■VV+ MGrcat Lakes !Misc.
ALO is underserved and overpriced. ALO's
0
100 " annualized enplaned passengers have
,0000 dropped from about 130,000 in 1977 to about
44 000
40,000 today. Tied to this, ALO has
g0.000
20.000 . ., .. June June ,June ' June June
1985 1997 izM2001 =2003 2004
Airlines 5 3 ` 3 1 1
Daily Departures 15 15 12 4 6
experienced a significant air service decline Daily Jets 2 0 0 1 2
over time-now down to one airline. Today, Non-Stop Cities 4 3 3 1 1
NW Airlink offers 6 daily round-trip flights Major Hubs 4 3 3 1 1
to/from MSP (4 SF3's and 2 CRJ's). Finally, the result is that ALO has a fraction of the
air service (seats per capita) relative to other similar-sized cities. The effect of this lack
of air service can have devastating effects upon the regional economy. Given that, ALO
is aggressively pursuing additional air service alternatives.
Annual One Way
City MSA Population Seats Seats per Capita Indexed to ALO
Waterloo-Cedar Falls, IA 177,000 82,660 0.47 100%
Eau Claire,WI 148,337 99,840 0.67 144%
Sioux City, IA 124,130 100,375 0.81 173%
Dothan,AL 137,916 123,492 0.90 192%
Texarkana,TX 129,749 198,195 1.53 327%
Alexandria, LA 126,337 207,052 1.64 351%
San Angelo,TX 104,010 243,820 2.34 502%
Wausau,WI 125,834 253,432 2.01 431%
Abilene,TX 126,555 259,150 2.05 438%
LaCrosse,WI 126,838 263,469 2.08 445%
Panama City, FL 148,217 298,911 2.02 432%
Monroe, LA 147,250 312,951 2.13 455%
Rochester, MN 124,277 351,714 2.83 606%
Bryan-College Station,TX 152,415 354,488 2.33 498%
Bloomington-Normal, IL 150,433 404,627 2.69 576%
Fargo, ND 174,367 423,692 2.43 520%
Sioux Falls, SD 172,412 587,893 3.41 730%
Fort Walton Beach,FL 170,498 605,377 3.55 760%
Billings, MT 129,352 778,764 6.02 1289%
Burlington,VT 169,371 957,918 5.66 1211%
Total 4,487,626 6,907,820 1.54 330%
Average 143,265 345,391 2.41 516%
The chart directly above (that was just mentioned) illustrates Waterloo-Cedar Falls'
plight. ALO has a fraction of the air service as compared to similar sized cities all over
the U.S. ALO needs to significantly improve their air service to get back to a more
normalized level appropriate for a city of Waterloo-Cedar Falls' size.
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ALO's lack of air service has produced an unusual amount of "leakage" from the
area. People are driving to other airports to initiate their air travel. The primary
reason for this "leakage" is that ALO airfares are higher than other regional airports.
This ties to ALO's lack of air service. In fact, ALO fares are on average higher than
peer airports (CIO, MLI, DSM) and ALO fares have risen faster than the U.S. as a
whole since 1990.
YE June 2001 YE June 2002
DBQ MKE MDW
MDW
MSP MKE/o MSP 1°I° 1% 1%
DBQ 2% 2 ° MLI 4°/0 MLI
2!0 °
ORD 2% 13lo ORD # b 17%
2% 2% 01,77
DSM 441'. `
C iL
ey ALO
37/0 CID
ALO 45%
ALO Average Fares, Indexed to YE4Q93
120% - -
ALO
115%
110% - -
105% -
100% -
95%
I'
90% E E E E E E E E E E E E E 1 E E E E E E E E E E E E E E E E E E E E E E E E E E
M d IC) CD CO N- co O) O) O N N CO �t
O) O) a) O) O) O) O) O) O) O O O O O C)
M N — co N d' CO C CO CV
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Outline for Use of Funds & Intended
Impact on Retention or Attraction of Air 4
Service and Associated Timeline
Outline for Use of Funds
Specific Grant Use - $ 25K Total Requested
Marketing support of $25,000
• Augment current professional marketing program
• Message: Promote lower airfares available from ALO and
speak to upgraded service (jets) and enhanced schedules
imarovina connections on.NW at their MSP hub.
Waterloo Air Service Goals & Strategies for Retention of Air Service
The following summarized objectives highlight Waterloo's near-term and air service
development goals for YE 6/30/06:
1. Increase capacity by 35% from YE 1Q05 levels (66 daily seats):
Present economic business proposals targeting 2 additional NW CRJ departures
— either through upgrades of current ALO service or non-stop DTW service.
2. Make airfares more competitive (reduce avq. fare 10% from YE 1Q05 levels
using 10% DOT sample):
Meet with NWA in 2Q 05 and quarterly thereafter to work with NWA fare analyst
to ensure ALO is competitive with competition and to show passenger leakage
out of ALO market that is lost to other airports on other airlines.
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3. Reduce Leakage (from YE 1 Q 05 level of 63% to YE 1 Q 06 of 53%):
Retain and enplane 164 passengers per day versus current 111 passenger level
through additional capacity, fare improvements, and marketing.
4. Improve Customer Convenience (additional hub served or more than 2 RJ's
serving ALO):
Meet with NWA in 2Q 05 and quarterly thereafter to present business proposal to
improve airline schedules, adding additional hubs served, providing RJ versus
turboprop service, etc.
The economic impact of retaining an additional 20,000 passengers is over $750,000 per
year.
Estimate of Recent Northwest MSP Service Upgrades at ALO & Forecast of Future Upgrades
Monthly Monthly
Waterloo- NW Incremental Annual
NW Daily Cedar Falls Enplaned % Retention NW Avg O&D Revenue Rev/ Cost/ Profit/
Scenario ALO Schedule Bookings a ALO Retention Increase LF RT Fare (000) Dept Dept Dept Margin
Baseline 4x SF3 9,000 2,103 23.4% - 52% $320 $673 $2,804 $2,950 ($146) -5%
1st CRJ Upgrade 1x CRJ,3x SF3 9,000 3,060 34.0% 10.6% 67% $320 $979 $4,080 $3,509 $571 14%
Add'I SF3 Freq. 1x CRJ,4x SF3 9,000 3,555 39.5% 5.5% 64% $320 $1,138 $3,792 $3,223 $569 15%
2nd CRJ Freq. 2x CRJ,4x SF3 9,000 4,512 50.1% 10.6% 64% $320 $1,444 $4,011 $3,249 $762 19%
Proposed
2nd CRJ Upgrade 3x CRJ,3x SF3 9,000 5,007 55.6% 5.5% 66% $320 $1,602 $4,451 $3,561 $890 20%
3rd CRJ Upgrade 4x CRJ,2x SF3 9,000 5,502 61.1% 5.5% 68% $320 $1,761 $4,891 $3,815 $1,076 22%
Key Assumptions:
-Waterloo-Cedar Falls books about 108,000 passengers per year,or 9,000 per month.
-Assumes that 2nd and 3rd CRJ upgrades get 1/2 of the retention increase(5.5%points versus 11.0%points)of earlier CRJ upgrades.
-Baseline numbers equate to NW/ALO results during March-April 2003 time period.
-Subsequent time periods equate to time period during which NW offered service-in-question to ALO.
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Overview of Marketing Programs 5
Overview of Marketing Programs
• ALO currently has a marketing plan in place to be implemented over a 3-year
period. Current plan advertises on and off during the year as funding isn't
available to advertise effectively through the year. The proposed IDOT funds
would leverage local and federal funds. ALO marketing program started in
January 2005 and will continue until December 2007.
Develop Marketing Plan to Reduce "Leakage" Problem
• ALO has hired marketing firm to develop 3-year developing marketing plan and
to "re-brand ALO".
• Goal: Reduce "leakage" by showing the new and improved airport terminal and
promoting improved local airfares, and other air service improvements, such as
airline schedules and regional jet service.
• A combination of television, radio, internet, and newspaper advertising will be
targeted at the airport's Catchment area (25 mile radius) and will include
information on air service improvements, such as additional flights, schedule
improvements, on time performance, and airline completion rates.
• IDOT funds will be used for same type of advertisements only providing ALO with
an annual campaign to increase effectiveness.
• Other specifics, including message and percentage of advertising by media type
to be determined.
• We believe this will be a very effective use of IDOT funds due to the fact
that ALO has had recent success initiating successful jet service,
introducing new fare pricing, and initiated a limited marketing campaign.
We believe with IDOT funds, ALO will be able to market and promote the
Airport consistently and are confident NWA traffic will grow and another
upgrade in service is very likely. This will provide real "Return On
Investment" for the program and also establish a success platform for the
IDOT in working to increase air service funding in the future. There is also
significant local and federal funding working along side IDOT funds to have
�a "true partnership".
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Community Commitment
6
Waterloo-Cedar Falls Air Service Task Force: Background
History and Purpose
The Air Service Task Force (ASTF) was established by the Waterloo Mayor's Office in
May 2002. This Task Force was formed to ensure "full community involvement" and to
review and analyze the commercial air service provided to the Waterloo Regional
Airport. Following the analysis, the Task Force was directed to formulate an air service
development plan and to identify action strategies to achieve the plan.
The prime philosophy of the Task Force has been to recognize commercial air service
as a profit motivated industry. Consequently, the Task Force developed a policy of
"partnering" with the airline carriers and sought ways to enhance profitable service to
ALO. In other words, the Task Force believes the best way to enhance and expand
service is to improve the profitability of that service for the carrier. Improved profitability
will lead to enhanced service.
Task Force: Investments Made in the Last Two Years
• $2.3 million in local GO Bond money for terminal renovations; total
renovation=$5.0 million.
• $1.0 million in "airline guarantee" support (hard dollars) of incumbent air service
• Professional services of airline consultant: $25,000
• Promotion and Marketing Efforts: $ 50K
• Ad-hoc travel agent marketing initiatives
• Total investment: $3.4 million
Local Community Commitment to Project
• Waterloo Chamber of Commerce will provide $2K of"in-kind" advertising
• Cedar Falls Chamber will provide $2K of "in-kind" advertising
• ,Local Air Service Task Force will meet monthly to ensure full community support
• ALO will waive landing fees,for 6 months of any new service
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Legal Sponsors and Airport Information
Airport Contact Information
Waterloo Regional Airport
2790 Livingston Lane
Waterloo, IA 50703-9678
Brad Hagen, Director of Aviation
Telephone: (319) 291-4483
Bhagen@flyalo.com
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