Passenger Airline Service Demand Study and Investment Attraction Strategy

Final Report February 13, 2007

Prepared by: Bruce Schollie, MBA, CMC President, Schollie Research & Consulting

Elan Buan, B.Comm Research Analyst, Schollie Research & Consulting

Elizabeth Scotton, BA Principal, Aviation Marketing

4603 50th Street Red Deer, AB T4N 1X1 Ph: (403) 346-9849 Fax: (403) 346-7263 E-mail: [email protected] Website: www.schollie.com

Passenger Airline Service Demand Study and Investment Attraction Strategy

A. Executive Summary A.1 Objectives and Background The Red Deer Regional Economic Development (RDRED) Marketing Partnership together with RARD commissioned this study to provide information and guidance to attract needed investment and funding to the Airport.

A.2 Methods Methods for this study were chosen to yield the required data and information for investment attraction but also suggest guidelines for presentation to prospective business investors. The following methods were used for this study: Ÿ A random telephone survey of 1,000 Central Alberta residents to assess the potential demand for passenger airline service. Survey topics included: o Flights taken and origins/ destinations in past year. o Use patterns for RARD. o Estimate of future demand for air service. o Trip purpose, season, duration, carrier used. o Ticket purchase behaviour (business and leisure). o Degree of interest in and perceived advantages/ disadvantages of air service from RARD. o Intention to use RARD passenger services. Ÿ Two focus group meetings were convened with the travel agent community in the Red Deer trade area. One group consisted of agency owners and the second group was primarily agents. 16 agents attended the group and 6 agencies were represented. Discussion topics included perceptions of central Alberta travel demand, challenges, industry trends, issues and barriers for local air service providers. Ÿ Intercept survey of RARD passengers. 31 Airline passengers (charter and scheduled) completed an intercept survey at RARD. Questions were similar to the telephone survey but focused on the passengers’ experience with RARD. Ÿ A brief comparative analysis of RARD and other regional airports to identify potential business attraction targets/ opportunities for RARD’s industrial park. Ÿ An airline attraction marketing framework that includes an outline and guidelines for creating a proposal for specific airlines.

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A.3 Study Results A.3.1 Market Overview Red Deer is at the heart of one of the strongest economic regions in North America according to a report released by TD Economics in 2003. An October 2005 update to this report confirmed that the region’s lead on other areas is gaining and states “the Corridor’s positive economic momentum is likely to continue over the next few years.” 1 By all traditional measures such as building permit growth, population growth, employment, and business investment Central Alberta’s economy continues to set records.

Central Alberta is in the enviable position of having a vibrant tourism industry sector in addition to Alberta’s traditional economic pillars: oil & gas, agricultural processing, manufacturing, and primary agriculture production. Regional manufacturing is anchored by a world-scale petrochemical facility in nearby Joffre. Several international companies such as Nova Chemicals, BP Canada, and Dow Chemical operate there. Other positive market characteristics include: Ÿ Private sector workforce exceeding 100,000 people . Ÿ Strong public sector workforce that includes Red Deer College and three other colleges with a total enrolment exceeding 18,000 students. Red Deer is also home to the head office of David Thompson Health Region that employs over 4,200 people. Ÿ Central Alberta is home to several large school boards with employment in excess of 4,000.

The trade area for the Regional Airport Red Deer (RARD) is estimated to be over 200,000 people and approximately 80,000 households. The City of Red Deer accounts for nearly half of this count (83,000 people). In Census Division 8, which is all areas within a 30-minute drive of Red Deer, the population increases to approximately 170,000.

A.3.2 Travel Profile The following table profiles Central Albertans’ flying behaviour:

Market Characteristic Sample (n=1,000) Households reporting a flight1 in the past year. 613 or 61.3% of households Households not reporting a flight1 in the past year but 169 or 16.9% of households intending to take a flight in the next year. Number of airline tickets1 purchased by the sample in 2,902 t ickets or 4.73 per household that reported a the past year. flight. Estimate of total tickets1 sold in Central Alberta 232,160 80% Calgary; 16% Edmonton International; Departure airport 3% Red Deer 68% Personal 16% Business (as an employee) 8% Business (as the owner) Trip purpose 8% Combination business/ personal 60% Domestic 23% Transborder (U.S.) Destination overview 17% International Note 1: Refers to flights originating in Alberta.

1 TD Economics Corridor Report, April 2003: See www.TD.com/economics/special/alta03.pdf.

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The table below summarizes the key findings from the telephone survey.

Market Characteristic Leisure Traveler Business Traveler 1.Vancouver/ Victoria/ Abbotsford 1. Northern Alberta 2. Toronto/ Hamilton 2. Vancouver/ Victoria/ Abbotsford Top domestic destinations 3. Kelowna/ Kamloops 3. Toronto/ Hamilton 1.Las Vegas 1.Houston/ Dallas 2. L.A./ San Francisco/ San Diego 2. Seattle Top U.S. destinations 3. Florida 3. Orlando 1. Cancun 1. U.K./ London 2. Europe 2. Europe Top International destinations 3. Hawaii 1. Online directly with the airline 1. Online directly with the airline Preferred ticket purchase method 2. Travel agent 2. Booked by employer Travel booked an average of 46 Travel booked an average of 25 Advance booking behaviour days in advance days in advance Similar patterns for both traveler types: More flights in summer, fall, Seasonality winter; fewer in spring Preferred airline WestJet preferred by both traveler types 1. Ticket price Factors important for choosing 2. Minimizing connecting flights airline 3. Schedule flexibility Awareness of services at RARD 32% are aware 40% are aware Intention to use RARD if flights of 95% or higher for both business and leisure travelers interest offered Desired destinations from RARD 1.Vancouver/ Victoria/ Abbotsford 1. Calgary 2. Calgary 2.Vancouver/ Victoria/ Abbotsford 3. Toronto/ Hamilton 3. Kelowna/ Kamloops 4. Kelowna/ Kamloops 4. Northern Alberta 5. Edmonton 5. Edmonton 6. Northern Alberta 6. Toronto/ Hamilton 7. Saskatoon 7. Houston/ Dallas 8. Las Vegas 8. Las Vegas 9. Winnipeg 9. Winnipeg 10. L.A./ San Francisco/ San Diego 10. Other U.S. destinations Willing to pay premium to fly from 71% willing to pay premium 74% willing to pay premium RARD? Amount of acceptable premium on a $300 flight that could be taken from $92 $105 Edmonton or Calgary

Perceived advantages for RARD centered on the major themes of convenience and cost. Several advantages related to convenience (saving time, closer to home, don’t have to drive to/ from cities) were mentioned to a greater extent than cost related items such as fuel expense. Half of respondents suggested that there were no disadvantages to fly ing from RARD. The most common theme relates to limitations regarding connections, scheduling, and destinations. Cost factors were mentioned by a relatively small number (10%) of respondents.

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Survey respondents indicated a high level of agreement with statements regarding support for RARD. Agreement ranged from 7.59 to 7.96 on a scale of 1-10 where 10 was strongly agree. The statements are: Ÿ Expansion of passenger flight services at the Red Deer Regional Airport is critical to support economic growth (mean agreement = 7.54) Ÿ Red Deer needs scheduled passenger flight services (mean agreement = 7.79) Ÿ I support efforts to expand the passenger flight services available at RARD (mean agreement = 7.89) Ÿ Provincial politicians in the region should do more to help get funding to improve RARD (mean agreement = 7.79)

The travel agent focus groups served to substantiate much of what was learned in the phone survey. They indicated the same key markets as common destinations for their clients and as targets for air service in the future. However, the travel agents were also able to provide insight into the airlines and how the market has changed in recent years. Their comments included concern over the lack of direct airline contact, customer service challenges and changes in the booking practices of the public. These insights are useful in designing air service proposals and marketing programs to attract new air services.

A.3.3 Recommendations Recommendation Area 1: Determine a long- term strategic air service development plan Based on the studies conducted, the following list of destinations and target airlines are the strongest opportunities for the Red Deer region.

Figure A1: Target Airlines and Destinations Estimated Airline Breakeven Destination Market Aircraft Frequency at 90% Vancouver1 33,958 EMB 175 4-5/wk 34,164 CRJ/Dash 5/wk 23,400 SAAB 340 5/wk 14,040 Beech 1900 daily 11,794 Kelowna/ Victoria 17,600 Beech 1900 2-4/wk 6,739 Jetstream 2-4/wk 7,114 SAAB 340 2-4/wk 11,232 Toronto2 28,128 EMB 175 2-3/wk 20,498 Seattle/Salt Lake City 23,395 Q200/CRJ -100 2-3/wk 11,232 Las Vegas3 7,891 737-600 1/wk = 21 weeks 4,498 Note 1: After examining total market potential, the recommendations for Vancouver are based on the combined results for Vancouver, Abbotsford and all other B.C. locations with the exception of Kelowna and Victoria. It is believed there is potential for service to both markets. However, passengers traveling to Vancouver are not likely to travel backwards, geographically, to reach Kelowna, which is why these numbers have been broken-out. Note 2: Toronto, like a number of other potential markets, would not be sustainable as a destination market. This number includes all markets east of Toronto, including Quebec and the Atlantic provinces. Obviously, service to Toronto could be further stimulated if a major airline were to provide the service, as the connections to their route system would be significant. Note 3: Most charter destinations vary greatly from year to year depending on the destinations offered by the tour operators. However, Las Vegas has potential, as it would be a strong candidate for stimulation (more people wanting to fly there) if a non- stop charter service were provided. If scheduled service were to be offered to another U.S. hub destination offering connections to beyond markets, like Seattle, the charter service and the scheduled service would impact one another in terms of load.

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Recommendation Area 2: Introduce the long-term air service development strategy to the community and determine support and next steps It is essential the entire community support the long term strategy for future air service and industrial development of RARD.

The airport will be successful in attracting new air services with the financial and resource support of various organizations within the community, such as chambers of commerce in the market area, economic development departments of the city, county and province, Tourism Red Deer, the hotel industry, and other major industry sectors.

Engaging the travel agency community will be crucial to developing community support. This could be done in the form of open-houses or tours of RARD, presentations, and regular communication.

Recommendation Area 3: Prepare proposals and target airlines as outlined in section E.2.4 Securing a commitment from an airline to start a new service will take a great deal of time and perseverance, especially with the larger air carriers. Given the time commitment to prepare and present the airline proposal, the help of an experienced consultant will be beneficial to the prospecting process. The airport should be intimately involved throughout the process and make the presentation themselves to the airlines. Although each proposal should be customized for the targeted carrier, the basic elements will remain the same. The first proposal can serve as a template for those that follow.

Recommendation Area 4: Investment Attraction Marketing to Stimulate Industrial Development at RARD Given the time and resources required to market RARD to a potential airline, the strategy for marketing industrial development opportunities could be approached as follows: Ÿ Create a marketing strategy and plan for industrial development. Ÿ Add content to RARD’s website to provide information relevant to industrial development. At a minimum, this should include maps of available land, lists of existing space for lease, servicing specifications, current tenants, a key contact, etc. Ÿ Maximize existing opportunities with RDRED’s website, publications, other materials, and marketing activities. Ÿ Consider a strategic partnership with a property developer/ manager.

Given the serious commercial / industrial land shortage in Red Deer, market conditions should be positive for industrial development at RARD.

Recommendation Area 5: Continue lobbying and applying for funds to improve RARD’s infrastructure Lobbying efforts should continue as success in obtaining funding will improve RARD’s marketability and provide a signal of confidence to investors and airlines. There are many aspects of this study that can assist in the lobbying effort. For example, communicating the level of passenger air service demand and the level of public support for RARD may help lobbying efforts.

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Table of Contents A. Executive Summary...... 1 A.1 Objectives and Background ...... 1 A.2 Methods...... 1 A.3 Study Results ...... 2 A.3.1 Market Overview...... 2 A.3.2 Travel Profile ...... 2 A.3.3 Recommendations...... 4 B. Background and Objectives...... 3 C. Study Methods ...... 3 D. Red Deer Region Market Analysis...... 6 D.1 Market Overview...... 6 D.2 Market Area Airline Travel Characteristics ...... 8 D.2.1 Flying Behaviour, Ticket Purchase, Trip Purpose, Departure Airport...... 8 D.2.2 Top Origins and Destinations for Central Albertans ...... 9 D.2.3 Airline Ticket Purchase Method, Timing, and Seasonality ...... 11 D.2.4 Travel Intentions, Airline Preferences, Determinants of Airline Choice ...... 12 D.3 Travel Intentions of Respondents Who Have Not Flown in Past Year ...... 13 D.3.1 Travel Intentions, Origins, Destinations, Trip Purpose...... 13 D.4 Regional Airport Red Deer (RARD)...... 14 D.4.1 Awareness, Use, and Satisfaction with Regional Airport Red Deer...... 14 D.4.2 Intention to Fly From Regional Airport Red Deer (RARD)...... 14 D.4.3 Central Alberta Market Price Sensitivity...... 16 D.4.4 Perceived Advantages and Disadvantages of Flying from Red Deer...... 16 D.5 Community Support for Regional Airport Red Deer...... 17 D.6 Travel Agent Focus Group Findings ...... 18 D.6.1 Travel Industry Trends ...... 18 D.6.2 Issues Related to Red Deer Air Service ...... 18 D.6.3 Other Issues...... 19 E. Investment Attraction Strategies ...... 20 E.1 Industrial...... 20 E.2 Passenger Airline Services...... 22 E.2.1 Aircraft and Load Factors...... 22 E.2.2 Destination Analysis...... 22 E.2.3 Airline Profiles and Recommendations ...... 26 E.2.4 Framework to Attract and Market a New Air Service...... 30 F. Next Steps/ Recommendations ...... 33 Appendix A: Aircraft and Load Factor Comparison...... 35 Appendix B: Destination Analysis ...... 37 Appendix C: Airport Development Opportunity Profile ...... 38

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Tables and Exhibits

Figure A1: Target Airlines and Destinations ...... 4 Figure C1: Summary of Project Methodology...... 4 Figure C2: Sample and Population Demographics...... 5 Figure D1: Economic Indicators...... 6 Figure D2: Red Deer Region Trade Area...... 7 Figure D3: Characteristics of Those Who Have Flown ...... 8 Figure D4: Top 25 Destinations: Number of Tickets by Destination and Trip Purpose...... 9 Figure D5: Percent of Tickets Purchased Last Year by Method and Trip Purpose...... 11 Figure D6: Advance Purchase of Tickets by Trip Purpose...... 11 Figure D7: Percent of Tickets Purchased Last Year by Season and by Trip Purpose ...... 11 Figure D8: Destinations for Additional Flights to be taken Next Year...... 12 Figure D9: Determinants of Airline Choice...... 12 Figure D10: Calgary Origin: Number of Tickets by Destination and Trip Purpose...... 13 Figure D11: Edmonton Origin: Number of Tickets by Destination and Trip Purpose ...... 13 Figure D12: RARD Awareness and Use ...... 14 Figure D13: Intention to Fly from Regional Airport Red Deer...... 14 Figure D14: Number of Tickets by Destination and Trip Purpose...... 15 Figure D15: Willingness to Pay a Premium to Fly from Regional Airport Red Deer...... 16 Figure D16: Advantages of Flying from Regional Airport Red Deer...... 16 Figure D17: Disadvantages of Flying from Regional Airport Red Deer ...... 17 Figure D18: Support for Regional Airport Red Deer...... 17 Figure E1: Summary of Business Development Opportunities for RARD ...... 21 Figure F1: Target Airlines and Destinations ...... 33

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B. Background and Objectives Members of Red Deer Regional Economic Development (RDRED) feel that supporting RARD at this time is critical to help ing establish and maintain a significant engine of economic growth in Central Alberta. To this end, Red Deer Regional Economic Development partnered with RARD to commission a study that will provide information and guidance to attract needed investment and funding to the airport.

The Terms of Reference outline the followin g strategic outcomes desired from using data from this study: Ÿ More foreign investors will expand or relocate their business to RARD. Ÿ New jobs will be created. Ÿ New technologies will be developed and brought into the region. Ÿ Assess the consumer demand and flying patterns in Central Alberta. This information will support the business case for new airlines to expand into the Red Deer Region. Ÿ Infrastructure issues would be addressed. Ÿ Airport funding would be sustained, which would result in economic wealth to the community.

This is a final report for this study. This report contains a summary of the study findings as well as recommendations for next steps toward achieving the strategic outcomes.

C. Study Methods To achieve the strategic objectives outlined above, study methods were chosen based on the following underlying assumptions about the situation: Ÿ There is very little information and data available regarding the Central Alberta market for passenger airline services. Ÿ Airline investment decisions and business investment decisions in general are complex and require extensive information about markets prior to consideration. Ÿ Solid market information is necessary but not sufficient to attract airline or other investment. The information needs to be packaged and presented in a format that is highly relevant and customized for each investment decision.

As such, methods for this study were chosen to yield the required data and information but also suggest guidelines for presentation to prospective business investors. The following table outlines the methods used for this study:

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Figure C1: Summary of Project Methodology Key Method Description Airline Demand Ÿ 1,000 randomly selected Central Alberta residents were surveyed by telephone Survey regarding the potential for passenger airline service. The survey was conducted between October 17 and 31, 2006. Ÿ The survey was designed to obtain information related to: o Flights taken and origins/ destinations in past year. o Use patterns for RARD. o Estimate of future demand for air service. o Trip purpose, season, duration, carrier used. o Ticket purchase behaviour (business and leisure). o Degree of interest in and perceived advantages/ disadvantages of air service from RARD. o Intention to use RARD passenger services. o Demographics. Ÿ The final sample has a confidence interval of ± 3.2% at the 95% confidence level Travel Agent Ÿ Two focus group meetings were convened with the travel agent community in the Red Focus Groups Deer trade area. One group consisted of agency owners and the second group was primarily agents. Ÿ 16 agents attended the group and 6 agencies were represented. The groups were held on October 18/19, 2006. Ÿ Discussion topics included perceptions of Central Alberta travel demand, challenges, industry trends, issues and barriers for local air service providers. Traveler Intercept Ÿ 31 Airline passengers (charter and scheduled) completed an intercept survey at RARD. Survey Questions were similar to the telephone survey but focused on their experience with RARD. Comparative Ÿ A brief comparative analysis of RARD and other regional airports was done to identify Analysis potential business attraction targets/ opportunities for RARD’s industrial park. Airline Attraction Ÿ An airline attraction marketing framework was suggested that includes an outline and Marketing guidelines for creating a proposal for specific airlines. The framework includes: Framework o Target airline list and brief description of each. o Relevant demand and use projections for RARD. o Recommendations for an education/ promotion component targeted at local stakeholders (public/ business community etc.). o A list of sections/ other data to be included in a proposal such as suggested marketing and promotional methods/materials.

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As with all research, the methodology used in this study has limitations and possible biases that the reader should be aware of. § Survey Sampling Error : For the telephone survey, a randomly selected sample of Central Albertans was taken to estimate market demand and other statistics. The survey statistics are generally accurate to within plus or minus 3.2%, 19 times out of 20. However, smaller sub-samples within the main sample will have higher error rates. The sampling error is subject to more variability for the intercept survey where the sample size was relatively small (n=31). § Sample Demographics: Prior to analysis, the telephone survey sample was weighted to ensure the sample reflected the population in terms the proportion of people in various age categories (see Figure C2 below). However, even with this adjustment, the sample appears to be slightly weighted to higher incomes. To the extent that the sample is weighted to higher incomes airline use behaviour and intentions may be overstated. § Market Bias: Media coverage of RARD is relatively frequent and has likely sensitized the market area to some extent to airport issues. It is possible that give this sensitivity and a desire to support RARD, airline flight intentions may have been overstated. § Qualitative Research: Focus group research, while good for identifying issues and exploring topics in detail, should not be quantified and projected onto a broader population.

Figure C2: Sample and Population Demographics Indicator Sample Population Sex Ÿ 48% male; 52% female Ÿ 50% male; 50% fe male Age (based on Ÿ 18-24: 15.7% Ÿ 18-24: 16.9% 18+ Ÿ 25-34: 20.5% Ÿ 25-34: 20.8% population) Ÿ 35-44: 18.6% Ÿ 35-44: 18.2% Ÿ 45-54: 19.5% Ÿ 45-54: 19.4% Ÿ 55-64: 11.5% Ÿ 55-64: 11.2% Ÿ 65-74: 7.1% Ÿ 65-74: 6.8% Ÿ 75-84: 4.8% Ÿ 75-84: 4.6% Ÿ 84 +: 2.3% Ÿ 84 +: 2.1% Ÿ Average household income: Ÿ 2004 Median family income (couple Income (note 1) $82,700 families) for Alberta: $76,700 Note 1: Population family income is an average of Edmonton and Calgary.

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D. Red Deer Region Market Analysis D.1 Market Overview Red Deer is at the heart of one of the strongest economic regions in North America according to a report released by TD Economics in 20032. An October 2005 update to this report confirmed that the region’s lead on other areas is gaining and states “the Corridor’s pos itive economic momentum is likely to continue over the next few years.”

Figure D1: Economic Indicators Indicator Evidence Building permit Ÿ Value of building permits in Red Deer for 2006 was a record $282 million - 11.5% higher value than the 2005 permit value of $253 million. Manufacturing Ÿ According to the 2006 City of Red Deer Manufacturing Survey, total manufacturing payroll for Red Deer is up 18.95% from 2005. In the same period the number of manufacturing jobs grew by 7.78%. Note 1 Employment Ÿ Unemployment for November 2006 in the Central Alberta region was 3.2% indicating a tight labour market (demand exceeds supply). Housing Ÿ The average price for a single-family home in Red Deer was $325,955 in December 2006. This is the highest average sale price on record and 49% higher than December 2005. House prices in surrounding communities increased by 52% over the same period. Note 2 Business Ÿ The inventory of public and private sector investments in Red Deer and area, as tracked by Investment Alberta Economic Development, was $541.30 million as of June 2006. This is a 32% increase compared to an inventory value of $410.90 million in June 2004. Population Ÿ Population of the Central Region has grown by 6.8% between 2001 and 2004, almost 2% Growth faster than Alberta in general. The population of Red Deer is expected to top 100,000 people by 2011. In Red Deer, inter-provincial migration and immigration accounted for over 80% of the population growth between 2004 and 2005. Note 3 Note 1: Source: http://www.reddeer.ca/ Red Deer Prospects Newsletter; Winter 2006 - Volume V, Issue 2 Note 2: Source: http://www.rdreb.ca/December%202006%20News%20Release.pdf Note 3: Source: http://www.reddeer.ca/ Population Projections

Central Alberta is in the enviable position of having a vibrant tourism industry sector in addition to Alberta’s traditional economic pillars: oil & gas, agricultural processing, manufacturing, and primary agriculture production. Regional manufacturing is anchored by a world-scale petrochemical facility in nearby Joffre. Several international companies such as Nova Chemicals, BP Canada, and Dow Chemical operate there. Other positive market characteristics include: Ÿ Private sector workforce exceeding 100,000 people . Ÿ Strong public sector workforce that includes Red Deer College and three other colleges with a total enrolment exceeding 18,000 students. Red Deer is also home to the head office of David Thompson Health Region that employs over 4,200 people. Ÿ Central Alberta is home to several large school boards with employment in excess of 4,000.

2 TD Economics Corridor Report, April 2003: See www.TD.com/economics/special/alta03.pdf.

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The economy of the Red Deer Region is becoming increasingly integrated as evidenced by major industrial expansions in the region and general economic growth in surrounding communities: Ÿ The Town of Sylvan Lake attracts nearly 1 million visitors annually and is one of Canada’s fastest growing municipalities. Sylvan Lake has doubled in population over the past 10 years suggesting an average annual growth of approximately 7%. The recent annexation of 7 quarter sections of Red Deer County land will provide a land inventory capable of supporting an additional 10,000 to 14,000 residents. This will likely see the population double again over the next 10 years to approximately 20,000 residents. Ÿ The towns of Stettler and Rocky Mountain House have experienced significant expansion of residential housing and the retail sector. The town of Blackfalds’ population grew by 8% between 2005 and 2006. Schlumberger recently announced a major expansion and relocation to Blackfalds. Ÿ The twinning of Highway 11 between Red Deer and Sylvan Lake will also foster more population growth and commercial expansion.

The trade area for RARD is estimated to be over 200,000 people and approximately 80,000 households. The City of Red Deer accounts for nearly half of this count (83,000 people). In Census Division 8, which is within a 30-minute drive of Red Deer, the population increases to approximately 170,000.

Figure D2: Red Deer Region Trade Area

Source: http://reddeercorridor.com/stats/tradeareamap.aspx

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D.2 Market Area Airline Travel Characteristics D.2.1 Flying Behaviour, Ticket Purchase, Trip Purpose, Departure Airport Of the 1,000 market area households surveyed, 61% reported that someone in the household had taken an airline flight in the past year. Of the 39% who had not flown in the past year, about half (46%) intend to fly in the next 12 months.

Figure D3: Characteristics of Those Who Have Flown Market Characteristic Sample (n=1,000) Households reporting a flight1 in the past year. 613 or 61.3% of households Households not reporting a flight1 in the past year but 169 or 16.9% of households intend to take a flight in the next year. Number of airline tickets1 purchased by the sample in 2,902 tickets or 4.73 per household that reported a the past year. flight. Estimate of total tickets1 sold in Central Alberta 232,160 80% Calgary; 16% Edmonton International; Departure airport 3% Red Deer 68% Personal 16% Business (as an employee) 8% Business (as the owner) Trip purpose 8% Combination business/ personal 60% Domestic 23% Transborder (U.S.) Destination overview 17% International Note 1: Refers to flights originating in Alberta.

Based on 80,000 households in the market area, approximately 49,000 households report having flown in the past year and have purchased approximately 232,160 tickets.

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D.2.2 Top Origins and Destinations for Central Albertans Eighty percent of tickets, originating in Alberta, purchased by Central Albertans in the past year were for flights departing from Calgary. The focus groups with Central Alberta travel agents confirmed this finding by reporting that 75-80% of their clientele originate their travel from Calgary International Airport. Upon further discussion, the agents indicated this is likely because the variety of available flights from Calgary has traditionally been superior to Edmonton. However, as the air service from Edmonton has continued to improve, agents are able to sell more tickets originating from Edmonton. The following table outlines the top destinations and trip purpose for these flights:

Figure D4: Top 25 Destinations: Number of Tickets note 1 by Destination /Trip Purpose Central Alberta % Destination Sample Market Estimate Personal % Business 2 Vancouver/ Victoria/ Abbotsford 452 36,172 70% 30% Toronto/ Hamilton 224 17,928 78% 22% Peace River/ High Level/ Fort McMurray/ Grande Prairie 194 15,518 17% 83% Kelowna/ Kamloops 118 9,414 92% 8% Houston or Dallas 108 8,667 14% 86% Las Vegas 99 7,891 88% 12% U.K. or London 97 7,790 33% 67% L.A., San Francisco, San Diego 93 7,443 91% 9% Florida 91 7,244 89% 11% Mexico-Cancun 83 6,630 95% 5% Other B.C. (Fort St. John/ Prince George/ Nanaimo / Comox) 73 5,878 73% 27% Europe 72 5,754 85% 15% Other Alberta 67 5,367 62% 38% Hawaii 63 5,007 96% 4% Other U.S. 60 4,796 36% 64% Winnipeg 59 4,755 76% 24% Regina 55 4,400 95% 5% Halifax 55 4,394 64% 36% Mexico-West coast 52 4,174 94% 6% Phoenix 49 3,887 84% 16% Ottawa 48 3,831 69% 31% Cuba 44 3,487 100% 0% Dominican Republic 41 3,295 96% 4% Mexico-Unspecified 37 2,953 100% 0% St. John's NFLD 25 1,975 61% 39% All destinations (note 3) 2,902 232,160 68% 32% Note 1: Each ticket is assumed to be a return ticket. Note 2: Includes flights that are a combination of business and personal. Note 3: Total is the sum of all destinations, not just those shown in this table.

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Trip purpose is predominantly personal (65% or higher) for nearly all the destinations. Exceptions are: Ÿ Peace River/ High Level/ Fort McMurray/ Grande Prairie - 83% business purpose. Ÿ Houston or Dallas - 86% business purpose. Ÿ U.K. or London - 67% business purpose. Ÿ Other U.S. - 64% business purpose.

The top destination for Calgary origin flights is B.C. lower mainland area followed by Toronto/ Hamilton, Houston/ Dallas and Kelowna/ Kamloops. For Edmonton origin flights, the top destination is northern Alberta (Peace River, High Level, Fort McMurray, and Grande Prairie), followed by B.C.’s lower mainland, and other B.C. destinations such as Fort St. John, Prince George, Nanaimo, and Comox.

Three percent of Central Albertans who flew in the last year departed from RARD. The top three destinations were Alberta’s north (Peace River, High Level, Fort McMurray, and Grande Prairie), Kelowna, and Vancouver. Nearly all flights (94%) to northern Alberta were business related. The other destinations were primarily for personal travel.

The intercept survey conducted at RARD confirmed the results of the telephone survey. That is, the top destinations were in Northern Alberta and B.C. (Peace River, High Level, Fort McMurray, Grande Prairie, Fort Nelson, and Fort St. John) and the majority (81%) of these flights were being taken for a business purpose. Most of those interviewed (25 out of 31) were going to Edmonton to connect to flights to their destination.

The travel agent focus groups’ results confirmed the telephone survey data both in terms of top destinations of Central Albertans and their trip purpose.

Travel Agent Focus Group: Top domestic destinations: 1. Toronto – YYZ 2. Vancouver – YVR 3. East coast – Halifax, Newfoundland

Travel Agent Focus Group: Top Transborder destinations: 1. Las Vegas 2. Los Angeles (California) 3. Florida

Travel Agent Focus Group: Top International Destinations: 1. London 2. Frankfurt 3. Asia (Thailand)

The travel agent community generally books more leisure travel than corporate, with only one agency reporting 90% of total revenue derived from business travel. It is important to recognize this as the responses throughout the discussion tended to be from the perspective of lower yield leisure travel activity.

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D.2.3 Airline Ticket Purchase Method, Timing, and Seasonality For personal travel in the past year, 78% of Central Albertans’ airline travel involved purchasing a ‘ticket only.’ Purchasing a package holiday was reported by 22%.

Ticket purchase behaviour varied considerably by trip purpose but overall booking flights online directly with the airline is the most common method.

Figure D5: Percent of Tickets Purchased Last Year by Method and Trip Purpose Personal Business note Purchase Method (n=1,941) (n=908) Online directly with the airline 46% 41% Travel agent 34% 15% Online through a 3rd party (Expedia, Travelocity, etc.) 11% 3% Phoned airline directly 4% 1% Booked by employer 1% 40% Loyalty program (air miles, points, etc.) 1% 0% Other 2% 1% Note: includes flights that are a combination of business and personal.

Airline tickets for personal purposes are booked further in advance than those purchased for business related reasons.

Figure D6: Advance Purchase of Tickets by Trip Purpose Average number of days ticket was purchased in advance Trip Purpose (n=923) Personal 46 Business (as an employee) 20 Business (as the owner) 22 A combination of business and personal 32

Central Albertans traveling for personal reasons purchase more airline tickets in the summer and winter coinciding with traditional vacation planning. Ticket purchase for business travel is fairly consistent through summer, fall, and winter with a noticeable slow down in the spring.

Figure D7: Percent of Tickets Purchased Last Year by Season and by Trip Purpose Personal Business note Season (n=1,941) (n=908) Summer (June to August) 28% 26% Fall (September to November) 25% 29% Winter (December to February) 28% 27% Spring (March to May) 18% 18% Note: includes flights that are a combination of business and personal.

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D.2.4 Travel Intentions, Airline Preferences, Determinants of Airline Choice Of the households surveyed that have flown in the past year, 59% indicated they would fly about the same amount next year. Of the remaining 41%, 21% said they would fly more and 20% said they would fly less next year. The highest number of additional flights would be to Canadian destinations other than the West.

Figure D8: Destinations for Additional Flights to be taken Next Year Average number of flights Destination (n=117) Manitoba, Saskatchewan, Alberta, British Columbia 1.40 Other Canadian destinations 1.80 U.S. destinations 0.90 International destinations 0.90

About 72% of those that have flown in the past year cite WestJet as their preferred Canadian Airline. Air Canada is mentioned by 14% and 12% don’t have a preference. The preference for WestJet is dominant regardless of whether the trip purpose is leisure or business.

Ticket price and minimizing the number of connecting flights are the most important factors that respondents considered when choosing a specific airline. Both of these items were rated 8.79 and 8.37 respectively on a 10-point importance scale.

Figure D9: Determinants of Airline Choice Importance Rating on a 10-Point Scale where 1=Not at all Important and 10=Very Important Choice Factor (n=117) Ticket price 8.79 Minimizing the number of connecting flights 8.37 Schedule flexibility 7.63 Distance to the departure airport 7.36 Parking charges 5.47 Ability to use loyalty points 5.40 Ability to collect loyalty points 5.12

Determinants of airline choice mean ratings do not show significant differences by trip purpose (leisure or business).

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D.3 Travel Intentions of Respondents Who Have Not Flown in Past Year D.3.1 Travel Intentions, Origins, Destinations, Trip Purpose Out of the 1,000 households surveyed, 39% or 391 indicated that they had not flown in the past year. Of these, just under half (47% or 176) indicated an intention to fly in the next year. On average, these intenders said they would take 1.35 flights in the next year. The flying patterns of the people who intend to fly in the next year are similar to those who have flown in the past year. For example, the top origin destination is Calgary-Vancouver/ Victoria/ Abbotsford.

Figure D10: Calgary Origin: Number of Tickets by Destination and Trip Purpose Central Alberta % Destination Sample Market Estimate Personal % Business 1 Vancouver/ Victoria/ Abbotsford 20 1,612 85% 15% Mexico-Unspecified 10 834 100% 0% Las Vegas 10 766 85% 15% Florida 9 696 90% 10% U.K. or London 7 580 100% 0% Montreal/ Quebec City 7 546 100% 0% Toronto/ Hamilton 5 404 100% 0% Other Alberta 5 391 100% 0% L.A., San Francisco, San Diego 5 389 82% 18% Ottawa 4 324 100% 0% Regina/ Saskatoon 4 292 62% 38% Mexico-Cancun 3 238 76% 24% All destinations (note 2) 156 12,502 86% 14% Note 1: Includes flights that are a combination of business and personal. Note 2: Tot al is the sum of all destinations, not just those shown in this table.

There are significantly fewer Edmonton origin flights but the Lower B.C. Mainland is the top destination.

Figure D11: Edmonton Origin: Number of Tickets by Destination and Trip Purpose Central Alberta % Destination Sample Market Estimate Personal % Business 1 Vancouver/ Victoria/ Abbotsford 5 427 100% 0% Las Vegas 5 414 100% 0% Toronto/ Hamilton 5 366 70% 30% Florida 4 352 37% 63% Hawaii 4 296 100% 0% L.A., San Francisco, San Diego 3 266 78% 22% Ottawa 3 254 100% 0% Mexico-Cancun 3 222 100% 0% Other B.C. 3 222 100% 0% All destinations (note 2) 49 3,909 87% 13% Note 1: Includes flights that are a combination of business and personal. Note 2: Total is the sum of all destinations, not just those shown in this table.

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D.4 Regional Airport Red Deer (RARD) D.4.1 Awareness, Use, and Satisfaction with Regional Airport Red Deer At the time of conducting this survey, Peace Air and chartered flight services were available at RARD. Out of the 1,000 households surveyed, only 30% were aware of “any airlines or passenger flight services that are currently available at the Red Deer Regional Airport.”

Figure D12: RARD Awareness and Use Question Result Aware of services at RARD? 30% (n=1,000) Able to identify the current carrier correctly - Peace Air 61% (n=262) Taken a scheduled flight from RARD? 19% (n=288) 55% very satisfied Satisfaction with RARD? 45% satisfied

Awareness of flight services is significantly higher (40% aware) among those who are mainly business air travelers. Of those who have flown from RARD, none were dissatisfied with their experience.

All but two of the 31 passengers intercepted at RARD stated they were either very satisfied or satisfied with RARD. Of the 2 that were dissatisfied, one respondent felt that that security was ‘intrusive’ and the other was dissatisfied because their flight was cancelled.

D.4.2 Intention to Fly From Regional Airport Red Deer (RARD) Intention to use RARD was very high with nearly all respondents stating that they would use it if there were destinations or connecting flights of interest to them.

Figure D13: Intention to Fly from Regional Airport Red Deer Question Result Current Users: Would you use passenger air service at RARD more if it offered other destinations or connecting flights of interest to you? 99% Yes (n=54) Non-Users: Would you consider using passenger air service from RARD if it offered destinations or connecting flights of interest to you? 94% Yes (n=914) Don’t fly = 46% Prefer Edmonton/ Calgary = 13% Prefer larger jets = 11% Too expensive = 9% Why wouldn’t you consider flying from RARD? (n=54 reasons) Other = 20%

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Intention to fly did not vary significantly depending on the Central Alberta community the respondent lives in. For example, the lowest intention to fly was 93% (yes) from respondents (non-users) who live outside of the city of Red Deer but within 20 minutes of Red Deer.

Nearly all (97%) of the passengers intercepted at RARD stated that they would consider flying from Red Deer. Only one passenger stated they would not consider flying from RARD, because they do not live in Red Deer.

Respondents were asked to identify up to 5 destinations or connecting airports they would like to fly to from Red Deer. In addition to destination, they were asked how many times in a typical year they may fly there, how many household members would travel, and what their trip purpose would be. Results were generally similar to the destinations cited by people who have flown in the past year (see section D.2.2) with the west coast, Kelowna/ Kamloops, and Toronto/ Hamilton among the most frequently mentioned.

Calgary and Edmonton are relatively high on the list of desired destinations from Red Deer.

Figure D14: Number of Tickets by Destination and Trip Purpose % Business Destination Sample % Personal (note 1) Vancouver/ Victoria/ Abbotsford 1,187 85% 15% Calgary 670 64% 36% Kelowna/ Kamloops 360 77% 23% Toronto/ Hamilton 341 86% 14% Peace River/ High Level, Fort McMurray, Grande Prairie 240 74% 26% Edmonton 238 77% 23% Saskatoon 138 100% 0% Las Vegas 125 90% 10% Winnipeg 114 93% 7% L.A., San Francisco, San Diego 102 92% 8% Regina 97 100% 0% Other B.C. 86 97% 3% Mexico-Unspecified 75 96% 4% Halifax 73 100% 0% Other U.S. 68 70% 30% Florida 56 100% 0% Other Atlantic Provinces 39 100% 0% Ottawa 36 100% 0% Mexico-West coast 36 96% 4% Phoenix 33 100% 0% Houston or Dallas 33 58% 42% Whitehorse/ Yellowknife 31 95% 5% Mexico-Cancun 30 100% 0% U.K. or London 30 98% 2% All destinations (note 2) 4,858 84% 16% Note 1: Includes flights that are a combination of business and personal. Note 2: Total is the sum of all destinations, not just those shown in this table.

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D.4.3 Central Alberta Market Price Sensitivity The majority of survey respondents indicated a willingness to pay a premium to fly from Red Deer.

Figure D15: Willingness to Pay a Premium to Fly from Regional Airport Red Deer Question Result Considering the possible expense and inconvenience of traveling to Edmonton or Calgary to fly, would you be willing to pay more to fly from Red Deer to the same destination? 70% Yes (n=930) For example, on a return flight that costs $300 from either Edmonton or Average = $94.53 (32% premium Calgary, how much more would you pay to fly return from Red Deer? on a $300 flight) (n=589)

Respondents who state they would fly from RARD for a business travel purpose state they are willing to pay an average premium of $105.00 on a $300 flight.

Respondents who live in the city of Red Deer are willing to pay the highest average premium (about $100). Residents of communities within a 20 minute drive are willing to pay an average premium of approximately $96 and residents of communities further than a 20 minute drive are willing to pay an average premium of $81 on a $300 flight.

D.4.4 Perceived Advantages and Disadvantages of Flying from Red Deer Perceived advantages for RARD centered on the major themes of convenience and cost. It is noteworthy that several advantages related to convenience (saving time, closer to home, don’t have to drive to/ from cities) were mentioned before cost related items such as fuel expense.

Figure D16: Advantages of Flying from Regional Airport Red Deer Advantage % Mentioning (n=954) Airport is closer to home 38% Convenience 36% Save time, less travel time 28% Parking/ vehicle storage not needed at airport 24% Don’t have to drive to/ from big cities 19% Smaller airport, less busy, easy access 7% Less expense for fuel for driving 6% Support local economy/ businesses more 5% Less concern about bad driving weather 3% No hotel room/ costs need to be incurred 2%

Half of respondents suggested that there were no disadvantages to fly ing from RARD. The most common theme relates to limitations regarding connections, scheduling, and destinations. Cost factors were mentioned by a relatively small number (10%) of respondents.

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Figure D17: Disadvantages of Flying from Regional Airport Red Deer Disadvantage % Mentioning (n=954) None 50% More connections, layovers 13% Cost might be higher 10% Smaller aircraft 7% Less selection of flights and times 7% Limited destinations and connections 7% Terminal / airport size and amenities 3% Small runway can’t accept bigger aircraft 2% Lack of parking services, shuttles, car rental 1%

Advantages and disadvantages cited by the passengers surveyed at RARD were very similar to those from the telephone survey.

D.5 Community Support for Regional Airport Red Deer Survey respondents indicated a high level of agreement to statements regarding support for RARD. Agreement ranged from 7.59 to 7.96 on a scale of 1 to 10 where 10 was strongly agree.

Figure D18: Support for Regional Airport Red Deer Agreement on a 10-Point Scale where 1=Strongly Disagree and 10=Strongly Agree Support Statement (n=985) A. Expansion of passenger flight services at the Red Deer Regional Airport is critical to support economic growth. 7.54 (sample average) B. Red Deer needs scheduled passenger flight services. 7.79 (sample average) C. I support efforts to expand the passenger flight services available at RARD. 7.89 (sample average) 7.79 (sample average) 8.00 (Red Deer residents) D. Provincial politicians in the region should do more to help 7.49 (Co mmunities 20 minutes or get funding to improve RARD. more from Red Deer)

Agreement on statement D above is highest from respondents who live in the city of Red Deer compared to other Central Alberta communities.

Agreement to the 4 statements above was slightly higher among passengers intercepted at RARD. Their agreement ranged from 8.04 for statement A, “expansion of passenger flight services at the Red Deer Regional Airport is critical to support economic growth” to 8.57 for statement B, “Red Deer needs scheduled passenger flight services.’

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D.6 Travel Agent Focus Group Findings D.6.1 Travel Industry Trends The travel agent industry has undergone significant changes over the last ten years. It is important to understand and address these issues within air service marketing init iatives in the future. Airlines, in an effort to cut costs, have adopted a number of new practices that have negatively impacted travel agents and the level of service they are able to provide to their clients. 1. Commission Cuts – With the exception of WestJet, airlines no longer pay commissions. Some agencies have ‘preferred airline’ relationships that enable agencies to receive a bonus or percentage of total sales at certain levels. The result of this is some agencies will push a particular carrier over all others, making it difficult for new airlines to secure a share of the market. 2. Internet – The Internet is the primary sales tool for airlines, tour operators and charter carriers. In many cases, the airline will provide lower fares on-line than is available to travel agents. The unfortunate result is that travel agents are either bypassed completely or the customer insists on a price match, an often impossible task for the agent. 3. Lack of direct airline interaction – Airlines have all but eliminated the existence of sales or customer representatives. When one of their clients has a problem, it is very difficult for a travel agent to intervene on their behalf. Further, the lack of airline representatives in the community prevents the flow of two-way communication between the agents and the airlines. The agents are often not notified of service changes, additions, suspensions or new initiatives.

D.6.2 Travel Agent Comments Regarding Air Service in Red Deer The travel agent community provided the following comments during the focus groups that were conducted for this study. These comments should be considered when developing future air service marketing and promotional programs. Comments should not be taken out of context, but rather used as an indicator of the overall understanding of air service in the region by travel agents.

Travel agents believe that Red Deer has had a very poor track record regarding air service. They have observed that airlines introduce a service but terminate it shortly thereafter. There are also airlines that do not provide the service promised, often canceling or postponing flights. This has created an atmosphere of unreliability, in their view. The travel agent community is concerned that this reputation will prevent new airlines from commencing service. Some specific comments by travel agents include: o Peace Air – among travel agents, this airline has a reputation of frequently canceling or re-scheduling flights. o WestJet – travel agents recall past negotiations between WestJet and RARD but are confused and lack information regarding why the discussions didn’t succeed. o Regional 1 – travel agents were never informed as to why this airline started the service and then terminated the service. A lack of information has led to speculation that it was canceled because of low passenger load factors. o Air Canada – Among the clients of the travel agents, Air Canada has a poor reputation, with many clients going out of their way to avoid this airline. If Air Canada or a partner/subsidiary such as Jazz introduced a scheduled air service, the travel agents are concerned that this reputation may challenge its success.

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D.6.3 Other Issues Identified by Travel Agents When asked what might negatively impact the future of air service in Red Deer, travel agents suggested that the potential high-speed rail project may jeopardize the future of RARD and its ability to attract and maintain scheduled air services. It was generally agreed among the agents that the rail project would only serve to move potential passengers to Calgary International and Edmonton International airports more efficiently.

The travel agent community has experienced great turmoil in the airline industry over the last decade. They have seen their direct airline revenues drop significantly, a complete lack of customer service provided by the airlines, a lack of communication from the airlines and booking practices changing significantly. This has resulted in a negative overtone emanating from the travel agent community that needs to be understood and addressed in any future marketing initiatives designed to promote air service.

The travel agents believe they are important to the success of air service in the Red Deer region and are committed to working as part of a team to this end. However, it is very clear in an industry with dropping commissions and more work required by the agents themselves, that air service initiatives in the future should consider these challenges. The three areas to address directly are: 1. Communication – directly and frequently with the travel agents. 2. Incentives – provide a means to reward travel agents for their work and support of new initiatives. 3. Airport experience – although some agents expressed concerns with the lack of services available at the airport, the vast majority have never had an occasion to visit or fly through RARD.

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E. Investment Attraction Strategies E.1 Industrial Airports tend to have a great deal of land due to runway clearances and noise limitations in urban areas. The result is airports in Canada have pursued other revenue streams using this space while not interfering with the operations of an airport. The municipalities in which the airports reside benefit from this development opportunity by having access to needed land for the development inventory and having the added benefit of being on an airport. Transportation access and space are the primary attributes to airport land.

RARD does not yet earn a great deal of revenue from traditional operations (compared to other cities of the same size with more scheduled air services) and therefore would benefit from further development of the lands surrounding the airport terminal and runways. This section is not meant to suggest that RARD and Red Deer County does not already make land available for development, but rather explore other potential businesses that might be interested in locating at the airport.

Five airports around Canada were selected as good examples of development. Below is a list of industrial development ideas that have been launched successfully , or are in the midst of commencement at other airports around the country.

Lethbridge County Airport An airport that has met with some success in attracting an airline is Lethbridge County Airport, home to Integra Airlines. Integra is a small carrier providing regional services within Alberta and charter services to points beyond the province. Since inception, the airport has been supportive in assisting the airline to establish a base of operations for its fleet and crew with terminal access, lobbying on behalf of the airline on political issues, and promoting the carrier at every opportunity. In return, the airline is in the best position to provide service on specific routes that have been identified by the community as viable. What started as a carrier connecting Lethbridge to Edmonton has now evolved to a growing charter airline with scheduled service to Edmonton and Fort McMurray. What worked well in this case was that it was a local family that started the business. Success came from the support of the entire community and the pride they felt to be the home base of their own airline.

Winnipeg Airport Authority The Winnipeg International Airport has been challenged due to the tendency of airlines to bypass them, making connections in other airports. This airport has adopted a strategy to attract more carriers, particularly cargo, to use their facilities. Of the developments they have pursued, the most significant is the establishment of a free trade zone (FTZ). The FTZ allows companies to import a product from outside of Canada, add value to it and then export again to a third country without paying import or export taxes. This zoning, sanctioned by the federal government, allows Winnipeg to attract tenants in manufacturing that work with companies outside of the country. This has attracted additional cargo carriers, which have provided more distribution opportunities for other tenants, an example of which is an e-commerce distribution company. In addition, the cargo carriers also use the other airport services, like aircraft maintenance.

Gander International Airport Gander has long been an established emergency stop over for carriers flying trans-Atlantic routes over the North Pole. Because of this, there was a need to be able to transfer or store cargo. This fostered the development of extensive cargo storage facilities. These storage facilities, both developed by the airport and by tenants, now offer the means to handle dangerous goods, walk-in cold and freezer storage, and heated storage. There are also bonded warehouse facilities and access to Canada Customs. Further, to assist and help attract cargo carriers, the airport purchased a deck loader. The airport is able to generate

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Other airports that have pursued the strategy of providing cargo infrastructure to attract cargo tenants include Edmonton International Airport, Prince George and Prince Rupert. RARD’s close proximity to the QEII highway and a solid business base in the oil and gas supply sector may help in the development of cargo support services focused on the regional cargo needs. Smaller carriers that sub-contract to larger cargo forwarders may find the location of the airport attractive. The airport offers less congestion than major airports and is suitable for smaller aircraft supplying the smaller communities in western Canada.

Charlottetown Airport Authority One of the major initiatives launched by Charlottetown Airport Authority in recent years has been to establish a business park. The airport zoned an area on site for soft industrial development, sectioned lots for lease, serviced those lots, and has now established a business park. The serviced lots offer all utilities including high speed internet, roads and lighting and access to apron areas in some cases. Investment is required on the front end of this type of development to ensure the infrastructure is in place to attract business. These types of parks exist at other airports around the country and have been successful in attracting businesses that may not be suitable in urban settings or that require more space. In Charlottetown, there are businesses working in diagnostic chemicals, ‘neutraceuticals’ and other bioscience-oriented areas. Airports have been successful in developing land in this manner by partnering with commercial property managers like Colliers.

Abbotsford International Airport Abbotsford International Airport has one unique development not often seen at other airports. They have a facility called Tradex – a trade and exhibition centre that hosts events throughout the year. Originally built and operated by the province, it has now been transferred to the City of Abbotsford. This venue was constructed to offer 120,000 sq. ft of column free space, providing room for virtually any type of tradeshow from aircraft to home renovation shows. This space is the largest in the Fraser Valley and provides an alternate venue for shows in the Vancouver region at a lesser cost. The airport receives rent and also has the ability to attract shows related to the aviation industry, like Airshow Canada and the Abbotsford International Airshow.

There are a variety of industrial developments at airports from mobile home manufacturing in Lethbridge to aerospace development in Montreal. RARD has the basic assets to attract industrial development and some of those companies may also assist in the goal of attracting scheduled service. In particular, that would include those companies working in aircraft maintenance, intermodal cargo and aerospace. It should also be noted that if a new airline commences a route from RARD, this will also attract more aviation related tenants like ground handling, fixed base operators and freight forwarders that will be needed to support the airline.

Figure E1: Summary of Business Development Opportunities for RARD Industry Type of business Airport Example Airline, ground handling, maintenance and Lethbridge County and other Aviation-related support airports Multi-modal transportation hub, temporary Winnipeg Airport Authority, Cargo storage, deck loader, free trade zone Gander International Airport Non-aviation related Business Park, trade centre/ complex, Charlottetown, Abbotsford, manufacturing Lethbridge County

Appendix C contains a summary profile of RARD and possible investment opportunities.

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E.2 Passenger Airline Services E.2.1 Aircraft and Load Factors Through the three types of research that were conducted for this report, strong markets have emerged as potential for scheduled service from RARD. However, it is important to understand what an airline requires to ensure a new route is sustainable. Airlines utilize a variety of aircraft, matching aircraft gauge with potential market, destination and cost. Every airline uses their own analysis to understand profitability and as airports, we are not privy to that level of detail. However, we are able to gain some understanding as to the potential of an air service based on aircraft size and capacity. The load factor is the average measure of passengers on the aircraft over a period of time.

At the end of this report (Appendix A) is a detailed look at the different types of aircraft that might be appropriate for use (or already being utilized) from RARD. The chart compares the published technical data, such as range (based on nautical miles) and seats. It includes a calculation to understand the market size that would be required to sustain a scheduled service at 80%, 85% or 90% load factor on an annual and weekly basis. Actual load factors depend on airline operating costs and can vary significantly from airline to air line and aircraft to aircraft. WestJet, for example, generally expects their load factors to be very high as they operate under very thin profit margins and control their costs very closely. Prior to any new service being launched, the load factor expectations of the airline should be well understood. Following is an example of an aircraft description:

CRJ – 100 This aircraft is flown on a regional basis for Air Canada’s feeder service, Jazz and a regional jet service in the U.S. called SkyWest that contracts directly to both United Airlines and Delta Airlines. The seat configuration for this aircraft varies from 40 to 50 seats. Based on the range of the aircraft and the airlines that utilize it, this could be appropriate for markets in western Canada and the Pacific Northwest. The total one-way seats available per year are 14,600 or 29,200 return seats per year. Just based on a once daily service at 80% load factor, over 23,630 passengers would be required in a given market. Vancouver, as a destination alone, has a total market of 22,240, making this a challenge to sustain. This also demonstrates that an airline might struggle to sustain a route utilizing this aircraft if the market is below the total seats required. However, this also proves the importance of securing scheduled service that combines both destination traffic (those passengers that actually want to go to Vancouver) and connecting traffic (those passengers that would use Vancouver as an airport to connect to other destinations).

Please see appendix A for the full chart.

E.2.2 Destination Analysis Appendix B examines a number of potential markets from RARD and matches them with likely airline candidates, based on a number of criteria. The destination was matched with market estimate, estimated distance from RARD and the type of aircraft that could be utilized for the service. As noted at the bottom of the chart, some markets have been combined that seem logical and would make the route more sustainable. The recommended timeline is an estimate as to the time required to lobby the target airline to initiate the service, based on the recommended strategies at the conclusion of this section.

The chart demonstrates that the smaller the market from the Red Deer region, less frequency and smaller aircraft is recommended. When certain markets are combined, it is possible that a larger aircraft and more service could be sustained, like Victoria and Kelowna, for example. This chart also demonstrates that some markets are simply not viable with certain aircraft. In most cases, the Boeing 737-600 is considered too large for the RARD market unless used for a charter service.

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Red Deer has a few markets that could be served on a scheduled basis and sustained in the long term. The destinations were analyzed and broken down based on total market potential. In some cases, the numbers were combined to provide a stronger argument for specific scheduled services.

In general, scheduled airlines such as Air Canada and WestJet analyze a market in terms of the following: Ÿ Total market size. Potential to sustain a scheduled service matching with the correct fleet allocation. Ÿ Business vs. leisure traveler breakdown: The business traveler tends to book on shorter time lines and therefore tends to pay a higher price for a ticket. This is called yield or profit potential per passenger per seat per kilometer traveled. Ÿ Potential connecting traffic vs. destination traffic : The larger the route network for a scheduled carrier, the more a desired market is measured not only by destination traffic but also the ability to attract connecting traffic. The ideal service has a strong connecting component to the passenger base.

Western Canada There are a number of destinations frequented by passengers originating from the Red Deer region. Vancouver is one of the strongest of these markets, attractive as a destination throughout the year. However, the market appears stronger when the numbers are combined with all other B.C. destinations reported in the survey. When considering service to Vancouver, one must also consider the likelihood of potential passengers to use this service to connect to beyond destinations, like the rest of B.C. and which markets would not be viable. It is not likely that passengers would fly to Vancouver and then change planes to fly back to Kelowna. For this reason, the market has been analyzed without the market numbers for Kelowna. Kelowna also tends to be a strong leisure market, while Vancouver has a healthy business traffic component. It is for this reason a major scheduled carrier would find Vancouver a more attractive destination due to the potential for a higher yield type of market. A major carrier might find a more leisure based route to be more seasonal and lower yield.

It is also for this reason that Victoria and Kelowna have been combined for a potential service that would combine both of these destinations. Neither destination is strong enough to stand on their own; however, combined they may be attractive to a smaller carrier. Further, the market to both Kelowna and Victoria is purely destination based and neither of these cities offers strong connections. The combination of these markets may also be more viable for a larger aircraft. These destinations are both major golfing centres and a larger aircraft would afford greater cargo/luggage capacity. Arguably, Victoria destined traffic may choose to fly through Vancouver or Kelowna, however, many passengers would prefer not to connect through a large airport if a same pla ne, one-stop service alternative is available. This could be attractive to an airline that would have the potential of gaining passengers in all three markets to fill their aircraft. In this scenario, the Red Deer market would actually only be responsible for filling a portion of the aircraft, not all.

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Eastern Canada The market destined to Toronto only is not large enough to attract the size of aircraft needed to fly this distance. However, like Vancouver, it is a much more attractive market when combined with all points east of Toronto, including Quebec and the Atlantic Provinces. Air Canada (AC) is the likely candidate for a service to Toronto due to the availability of a large variety of aircraft. The would also be in the best position to connect passengers originating from central Alberta to virtually anywhere in the AC route network and also have the potential to capture passengers destined for the eastern U.S. and Europe.

It should be understood that to attract a service from RARD to Toronto would likely be the most difficult of potential services identified. The recommended carrier has no incentive to begin service from Red Deer as it already captures this market through Calgary. It will be the task of the airport to change the accepted level of service from this carrier, which could take upwards of two years to achieve. In addition, a Toronto service could also impact the potential to attract any U.S. services. If, for example, Skywest under the United Airlines banner were to launch a service to Denver, a hub for United Airlines, it would be dependent upon attracting passengers destined to cities all over the U.S. A Toronto service would also be dependent upon US destined passengers as part of their total market base. The local market could consider a scheduled Toronto service on a Canadian carrier more attractive. However, a US destined service could also erode the market base by pulling the US destined passengers to the route due to superior connectivity from a US hub. Either way, the two may not be sustainable if initiated at the same time.

U.S. Destinations The study results revealed a strong leisure and business travel component to the United States. Given the strong economy and generally high household incomes of the Red Deer region, this is not entirely surprising. The top destinations are Las Vegas, Phoenix and California. The top US business destinations are in Texas, likely due to the strength of the oil and gas sector in the Red Deer region.

There have been a number of changes in the way the major U.S. carriers provide service to their customers. The primary change is that airlines move their passengers by using subsidiary companies or contracting directly to smaller airlines to provide feeder traffic to/from their major airline hubs. These carriers are very efficient with low costs as they are able to utilize smaller aircraft, like the regional jets. It is because of this fact that Red Deer could have the potential to support a limited scheduled service to a U.S. destination. When making recommendations in this regard, the airline figures prominently in the analysis, rather than the potential market for a particular destination.

There are two carriers in particular that already provide scheduled service to major hubs in the U.S. from Vancouver, Victoria, Calgary and Edmonton. As described in the airline profiles section of this report, Horizon Air and Skywest Airlines (operating either as United Express or Delta Connector) are the carriers that are recommended. Therefore, when analyzing the potential market, destinations were combined to make the most sense based on the hub. For Horizon, Seattle is the hub providing excellent connections to the entire west coast of the U.S. and Mexico, as well as connecting to major partners in the rest of the U.S. like Phoenix, another strong U.S. destination for the Red Deer region. For Skywest, the hub would either be Denver or Salt Lake City, but the market would be similar in size to Seattle. Skywest would be particularly strong to serve the oil and gas business market flying to Texas.

It is important to understand that scheduled service provided by both of these airlines would not be sustainable. Further, if a charter service were to be launched, it could skim the cream of the leisure traffic off the top for the duration of the service, further eroding the potential to sustain a U.S. scheduled service.

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Sunspot Charter Destinations The Red Deer region has a charter potential for many reasons beyond market size. Because Red Deer is a cold climate city, many residents look forward to a quick escape in the winter. These passengers must face potentially treacherous driving on the QEII Parkway to reach Calgary or Edmonton for their departing flights in the middle of winter. In addition, the residents of Red Deer are already accustomed to booking packages to destinations like Las Vegas and Mexico, substantiated by the travel agent focus groups.

The tour operator and their estimate of demand for a particular destination usually determine the destinations served by a charter carrier. For example, WestJet, although a scheduled airline, is under contract to provide aircraft for charter services to Vacances Transat, the parent company of Air Transat. Vacances Transat, as the tour operator, determines where that aircraft will fly. Charter carriers are flexible in their schedule and fleet allocation, much more so than a regular scheduled carrier operating within its own route system. These types of carriers often operate only one service per week and consider it an advantage as it allows the carrier and tour operator the ability to utilize the aircraft elsewhere.

The types of packages that are offered also determine frequency. If a tour operator offers 7-night hotel stays, than a weekly service is viable. If they offer 3 and 4 night hotel stays, then that increases the frequency as the passengers need to be returned to their origin sooner.

It is recommended that a limited weekly charter to Las Vegas be proposed operating approximately 21 weeks, November 1 to March 31. Charters typically operate sunspot services from mid-October to the end of April. Air Transat or another likely tour operator such as Conquest Vacations, Signature Vacations or Sunquest Vacations should be the first point of contact. The travel agents in the Red Deer region would be in the best position to suggest the strongest tour operators in the market, and perhaps, assist in securing the service.

A Note on Calgary and Edmonton Calgary and to a lesser extent Edmonton were both potential destinations listed by the respondents to the phone survey regarding future air service. This study does not ignore the potential for a commuter service to Calgary. However, to pursue this type of service would make other destinations extremely difficult to achieve. A scheduled service to Calgary would seriously erode all of the other markets and limit RARD’s potential to attract its own non-stop services to other destinations like Vancouver.

It is believed that the potential flying market in Red Deer is not destined for Calgary, but rather using that airport to connect to other destinations. If the market were destined for Calgary, they would be more likely to drive rather than fly. In addition, to be successful, the servic e would need to be offered by a mainline carrier with a great deal of frequency to meet the maximum potential for connecting flights. The short distance and cost to operate would not be attractive to a major domestic carrier, and in the case of WestJet, virtually impossible to offer because their fleet only consists of the large Boeing 737 aircraft.

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E.2.3 Airline Profiles and Recommendations Following is a list of airlines that would be suitable to approach for future air service for the Red Deer region. These airlines have been chosen based on the following criteria: Ÿ Location of home office or fleet base Ÿ Appropriate fleet for the market Ÿ Type of air service provided (schedule or charter) Ÿ Current destinations/markets offered Ÿ Connectivity to other servic es Ÿ Code-shares with airlines

This list does not consider any operational limitations that the airline might have to initiate service from RARD. Every airline has different rules, generally under the pilot labour agreement and sometimes within the operating rules of the aircraft, particularly the U.S. based carriers and those carriers providing services on regional jets. RARD faces challenges in attracting some carriers due a number of operational limitations, which include: Ÿ Lack of terminal capacity Ÿ Lack of an ILS approach Ÿ Runway length limitations for certain types of aircraft Ÿ Runway load limitations Ÿ Canada Customs and Immigration services are not available for inbound international flights

It is recommended that as any airline is considered for route proposal in the future, a thorough understanding of the unique operational needs for each carrier be carefully researched.

A. Long Haul Domestic Airlines 1. Air Canada and Air Canada Jazz Air Canada is Canada’s largest domestic and international air carrier. Air Canada has an extensive fleet for long haul and limited short haul services. The shorter haul services are provided by the Embraer Regional Jets, which are similar to the CRJ aircraft used by AC Jazz. Seat capacity ranges from 73 to 93 seats and includes business class. This study also examines the potential for service on the A319 aircraft within Air Canada’s fleet with a seat capacity of 120 seats, including business class. Air Canada is a member of the Star Alliance, which provides the ability for smooth connections throughout a system of international carriers that includes the U.S. based United Airlines and the German based Lufthansa.

Jazz provides regional services in various areas around the country, with a focus to connect to Air Canada mainline service. To that end, their flights are fully code-shared with Air Canada and most of the available routes within the Star Alliance. Their fleet includes Dash 8 turbo props with a capacity of 37 or 50 seats and the Canadair Regional Jets (CRJ) with seat capacity up to 75 seats. Jazz only offers economy seating.

Air Canada would be suitable to provide services to Vancouver or Toronto, and AC Jazz would be suitable for service to Vancouver. Both routes could be sustained by a strong destinatio n and connecting traffic component. As Toronto is the primary hub for Air Canada, passengers would be able to connect to virtually anywhere within the AC system. Vancouver would also provide a similar advantage. It would not be recommended to approach this airline for other regional destinations such as Kelowna, as the service would be entirely dependent upon destination traffic, a scenario usually not favoured by this carrier.

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2. WestJet WestJet, Canada’s only low cost carrier (LCC) is based in Calgary. They provide services throughout Canada and have newly launched scheduled services to destinations in the U.S. In addition, they provide charter services to sunspot destinations with tour operators/charter carriers such as Air Transat. WestJet exclusively utilizes the Boeing 737 jet aircraft, the smallest of which is the 600 series, economy seating 119 passengers.

Although WestJet is still in a growth mode, rare for larger carriers at this time, they are focusing on stimulating existing services and ensuring the right sized aircraft is serving the right market. Given their current focus, it is not likely that WestJet would consider initiating service from Red Deer in the near future. However, WestJet will monitor the market closely as new scheduled services are launched from Red Deer. It should be noted that although WestJet provides the aircraft for charter destinations, it is the tour operator that contracts them and sells most of the tickets. Therefore it should be the tour operator that is approached for any potential charter services.

B. Regional Airlines The regional carriers that follow are those western Canadian based carriers that would be capable of providing service to/from the Red Deer region. They have been chosen for their fleet, their success in the past and their willingness to consider new routes. This list is not exhaustive; however, it is felt that these carriers would be strong candidates for future service. These carriers could be approached with the appropriate proposal at any time and would be capable of making decisions to commence a service on a shorter time line than a long haul domestic carrier.

1. Swanberg Air This airline is based in Grande Prairie, Alberta and only provides scheduled services to Calgary at this time. Their fleet includes a 7 seat Cheyenne and the 16 to 19 seat Jetstream 31; both are suitable aircraft for the short haul market from Red Deer.

2. Corporate Xpress A Calgary based airline, Corporate Express, has served the charter and scheduled industry in Alberta for many years with long-term corporate contracts for companies such as Telus. Currently, they provide services from Calgary and Edmonton to Grande Prairie, Dawson Creek and Fort McMurray. Their fleet includes Jetstream 31, the 30 seat SAAB 340 and the 7 seat Piaggio 180 Avanti. This airline would be suitable to provide scheduled service to Kelowna, particularly if the SAAB 340 were to be utilized.

3. Central Mountain Air Central Mountain Air (CMA) is a unique carrier as they provide three types of scheduled services. Air Canada contracts them directly to fly certain routes to smaller communities in cases where their aircraft may be too large to be profitable. In this case, Air Canada markets and sells these flights exclusively. CMA also flies certain routes on a code-share basis with Air Canada with both carriers selling the seats. Finally, they also provide services exclusively under the CMA name. All together, this Smithers, B.C. airline provides service to 17 communities throughout B.C. and Alberta.

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There are only two types of aircraft in their fleet; the Beech 1900 with a capacity of 18 seats and the 30 seat Dornier 388. In consideration of the range and size of their aircraft, it would be recommended that CMA be approached to provide service from Red Deer to Kelowna with continuing service (not connecting) to Victoria. Currently, CMA provides service to Comox, Campbell River and Kelowna but does not provide service to Victoria. In addition, service to Kelowna, if appropriately timed, could also provide connectivity to communities in northern B.C. within their route network, such as Prince George.

4. Alberta City Link (Bar XH Air) This carrier is based in Medicine Hat, Alberta. Currently they do not provide any scheduled services, but have in the recent past. Operating under the name of Alberta City Link (also AltaLink), this carrier has provided services from small Alberta communities linking to Edmonton International and Calgary International Airports with a code-share on some Air Canada mainline services. Their fleet includes the Jetstream 31 and the 12 seat King Air 200. This would be a suitable airline to approach for regional services, mindful that the fleet is based in Medicine Hat. This airline has indicated they would welcome a proposal and would again consider scheduled services in the future.

5. Integra Air Integra Air is based in Lethbridge, Alberta and currently provides service to Edmonton and Fort McMurray from Lethbridge. Their fleet has changed recently and is now comprised of the Jetstream 31 and the 7 seat Piper Cheyenne. A conservative company with a great deal of support within the Lethbridge community, they started out many years ago providing the only service between Lethbridge and the provincial capital on a King Air. This airline could be considered for regional services to northern Alberta or B.C.

6. Northwestern Air This airline is based in Fort Smith, NWT and has recently launched service between Red Deer and Saskatoon with connecting servic es to Meadow Lake, Fort McMurray, Fort Smith and Yellowknife. They use the Jetstream 32 aircraft with seating capacity up to 19 passengers. This service should be monitored closely and promoted strongly to the community. It is not recommended that this airline be approached to initiate any other new services due to the limited connecting or destination opportunities currently offered.

7. Pacific Coastal Airlines This Vancouver based airline is family owned and has been in business since 1975. Although their current route system is only in BC, this carrier might be a good candidate for expansion to a smaller Alberta market, providing connections to 14 additional destinations in B.C. Their fleet includes the SAAB 340, the Beech 1900 and the King Air 200, all aircraft that have been identified as appropriate for the Red Deer regional market. Although their operations are only to/from the South Terminal at Vancouver International, their service does include transfers to the main terminal.

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C. Transborder Airlines The Red Deer region has some strong markets across the border to the U.S. (transborder). However, no one city would be capable of sustaining a daily service. These markets fall into two categories: those destinations that would be considered a strong charter destination, and those markets that could be considered as strong connecting markets. Two of the airlines that have been identified have a history of providing successful scheduled, short haul transborder (U.S.) services to major hubs in the U.S. They have been chosen for their route system (strong connections) from a hub that could be serviced easily by a regional jet.

Achieving a transborder service will require the elimination of certain operational obstacles, such as commencing Canada Customs service at RARD for inbound flights. Further, the planning timeline for these carriers is far longer, taking upwards of two years of constant contact with the target carrier to make a decision to initiate a service. There is potential for the Red Deer region and it should be considered as part of the long term air service development strategy.

1. Horizon Air Based in Seattle, Washington, Horizon Air is the regional subsidiary of Alaska Air Group, which includes Alaska Airlines. Horizon provides services between western Canada and the U.S. Pacific NW, mostly Seattle. However, because Horizon provides service to Seattle, passengers are able to connect seamlessly to the Alaska Airlines system, which provides services throughout the western U.S. and Mexico. In addition, the Alaska Air Group also code-shares with Northwest Airlines and Continental Airlines, providing connecting service on an east-west basis from Seattle. Their fleet consists of the Canadian built Q200, Q400 and CRJ-700 with economy seating only.

Horizon Air is currently changing the gauge of aircraft on certain routes, which may make the smaller Q200 available for other routes. Although Red Deer does not have sufficient destination traffic to sustain service to Seattle, the connecting opportunities of this airport could attract those passengers destined for anywhere on the North American west coast, including Mexico, which are strong markets for the Red Deer region. The Alaska Air Group has very strong leisure packages available throughout the year and has met with a great deal of success in Edmonton and Calgary, stimulating the market in both directions.

2. SkyWest Airlines This Utah based carrier provides contracted services to United Airlines, operating as United Express and to Delta Airlines, operating as Delta Connection. Their fleet primarily includes the CRJ 100 with a capacity of 40-50 passengers and the CRJ 900, seating 70 passengers. This carrier has expanded significantly into western Canada over the last few years, providing services to Salt Lake City under the Delta brand and services from Denver, San Francisco and Chicago under the United Express name. Both carriers fly to Vancouver, Calgary and Edmonton. Although successfully attracting this carrier to the Red Deer region could take more than two years, this would also be an appropriate carrier for U.S. connecting airports/destinations such as Denver and San Francisco.

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E.2.4 Framework to Attract and Market a New Air Service Attracting a new air service primarily takes time and patience and ensuring that the proposals are well researched. Following is a basic framework to attract a new service.

1. Research, research, research! Ÿ It is essential that the region have a thorough understanding of the market potential. The airline will conduct its own analysis to determine the profitability of any potential new route, but the research that is provided by the region will certainly get the attention of the airline and cause them to take another look. This study provides credible data on the Red Deer region market, highlights of which should be included in air service proposals. 2. Goal Setting Ÿ Determine the destinations that make the most sense for the region and set a realistic time line to secure the service. This does not preclude seeking the same air service from more than one airline, as the destination is the goal, not the airline. 3. Examine funding options and potential incentives to attract and invest in the new service. Ÿ Develop a list of potential incentives to assist in attracting the airline to the market. Airlines take a great deal of risk to launch a new route with the intent to be profitable within a pre-determined period of time. In the case of Red Deer, there is no base of operations for any major and most of the minor carriers identified. Not only will the airline need to consider the cost of allocating the aircraft, but also the cost of positioning crew, advertising, fuel costs, landing fees, terminal fees, etc. It is now expected by airlines that an airport/ community will bring incentives to the table when trying to attract a new air service to diminish the financial risk for the airline. Some incentives may include: Ø Relaxation of airport fees for landing and terminal usage for a specific period of time. Ø Allocation of marketing funds to assist in the launch of the air service financed by the airport, the city, the county, economic development, tourism industry, travel agents, etc. Ø Ticket guarantee – the community guarantee a certain number of ticket sales. Ø Allocation of human resources to assist with the effort. Ø A local hotel could offer a deep discount for any crew that needs to overnight. Ø A rental car company could provide a vehicle for a crew. Ø Local media could commit to advertising support, advertorial/editorial coverage, etc. Ø Specific marketing initiatives to launch and help sustain the service (see marketing plan below) including profile building and brand awareness. 4. Identify potential community support, financial and other resources. Ÿ Is there community support to attract the service? Will the community assist in not only the marketing of the new service when launched, but also participate in the journey to attract the service? This could include participating in tradeshows in the destination city to raise awareness, setting economic and tourism development goals in the destination and strong connecting markets, etc. 5. Prepare a customized proposal for air service for every airline targeted. Ÿ A proposal in the form of a power point presentation and a written proposal should be prepared for each airline targeted. The presentation should be short, concise and in bullet form, allowing the presenter to elaborate as required. The following elements should be included: Ø Community overview – Always assume the airline knows nothing about the community and it is the job of the airport to educate them. This section should feature all of the great news

Schollie Research & Consulting - CONFIDENTIAL - FOR INTERNAL USE ONLY Page 30 Passenger Airline Service Demand Study and Investment Attraction Strategy about the economy, tourism, future development and demographics about the RARD market area. Present this information in an easy to understand format utilizing graphs and charts whenever possible. By the end of this section, the airline should feel that this community is underserved in terms of air service and has great potential! Ø Airport overview – As most airlines have never operated to/ from RARD, this section should provide the key operational elements of the airport, including runway length, terminal facilities and services like CATSA, apron parking, re-fuelling options, navigational aids and NavCanada services. Include photographs wherever possible. Also include recent changes and operational challenges and how they will be addressed to accommodate the airline. This section also provides the opportunity to address misconceptions about the airport, like scheduled services that were provided in the past and why they were terminated. Ø Include the research – Present information on the research that the airport has conducted demonstrating the viable market potential for scheduled services. Key elements to include would be the market numbers for the top destinations, the buying habits of the community, the propensity to spend more money to fly from Red Deer and the business/leisure breakdown of the passenger base. It is also important to demonstrate an understanding of the airline itself; their route network, their fleet and why they are the best fit for the route. Ø Create a marketing plan for the potential new service – Demonstrate how the airport and community will support the service through community events, financial contributions, dedication of a resource to assist the carrier, etc. The marketing plan should address the key audiences to sell the service: travel agents, businesses, economic development organizations, tourism industry and the public. The more the community appears to support the potential new service, the stronger the message is for the airline considering that service. The approach to the new air service should be a full partnership between the airport, the community and the airline. Ø Lastly, outline the specific incentives that can be provided to the airline to initiate the service. It is recommended the incentives be agreed upon together with the airline and be in writing. It is also suggested that the airline be held accountable to the commitments they make. For example, RARD may wish to consider tying the incentives to key load factor goals and marketing dollars allocated by the airline. In addition, it is recommended that RARD push the airline to commit to leave the service in the market for a period of time and tie that to specific incentives, like the relaxation of landing fees. If the service is terminated prior to the specified period, than the airport could have certain repercussions to recoup the lost revenue/investment. 6. Who attends the meeting? Ÿ The meeting with the airline should include one or two people representing the airport and the community. It is not advised that politicians be used for these meetings, as the airline will perceive this to be a heavy-handed approach. The people attending should be very knowledgeable about all of the information in the presentation and the written proposal. Every person attending the meeting should have a copy of the presentation and the proposal. 7. Who to meet with? Ÿ It is not advisable to seek out the President and CEO at large carriers, like AC Jazz, as they do not tend to focus on the details of specific routes and communities. The people that occupy the positions of marketing, route development, business analysts and planning are most appropriate to meet with larger carriers. Working from the top and the bottom of the airline hierarchy is also effective, as the junior analysts can often ‘sell’ your route to the managers above. In the case of smaller airlines, it is common for the Operations Manager and /or the President to wear a number of hats and be intimately involved in all decisions.

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8. Where to meet the airlines? Ÿ Sometimes the most challenging part is finding the right person at the airline with whom to meet. In the case of the smaller regionally focused airlines, first contact can often be made at travel agent tradeshows (Association of Canadian Travel Agents), as the smaller carriers will often attend with a display. Tour operators and charter carriers also attend these shows. For the larger carriers it is helpful to attend specific air service development conferences hosted by various aviation organizations like provincial associations, ACI-NA (Airports Council International – North America) and IATA. ‘Jumpstart’ is held on the last day of the ACI-NA Marketing and Communications conference every year and is an excellent place to meet with Air Canada and various U.S. based airlines. These types of meetings are often less than ten minutes and only serve as an introduction and opportunity for later follow-up. The decision makers for new routes always attend ‘Jumpstart’.

Securing a commitment from an airline to start a new service will take a great deal of time and perseverance, especially with the larger air carriers. It is important to remember that your airport is one of many airports seeking service and RARD will be in competition with other destinations to attract the airline. Follow-up and regular communication in the form of e-mail, phone calls and letters is an effective way to keep your airport top of mind. The further the destination sought, the longer it will take to achieve that goal.

Although the marketing approach assumes that an existing airline would be drawn to RARD, there is a real possibility that a local entrepreneur(s) could emerge to start an airline based in Red Deer. As previously mentioned, this is how Integra Air started in Lethbridge. In this case, RARD should be prepared to provide similar marketing and information support to foster this ‘home grown’ solution.

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F. Next Steps/ Recommendations Recommendation Area 1: Determine a long- term strategic air service development plan The following figure matches the identified potential markets with airline, aircraft and what the airline would require to be sustained at a 90% load factor. This table is deliberately conservative in its recommendations. The potential services, if all were introduced at the same time, would impact one another severely. Therefore, rather than recommend a service that would require every potential passenger in the region to use the service, a conservative estimate was made to provide a more realistic approach to long term sustainable routes from the Red Deer region.

Figure F1: Target Airlines and Destinations Estimated Recommended Total Passenger Destination Market Airlines Aircraft Frequency Load @ 90% Vancouver1 33,958 Air Canada EMB 175 4-5/wk 34,164 Jazz CRJ/Dash 5/wk 23,400 Pacific Coastal SAAB 340 5/wk 14,040 CMA Beech 1900 daily 11,794 Kelowna/ Victoria 17,600 CMA Beech 1900 2-4/wk 6,739 Integra Jetstream 2-4/wk 7,114 Pacific Coastal SAAB 340 2-4/wk 11,232 Toronto2 28,128 Air Canada EMB 175 2-3/wk 20,498 Seattle/Salt Lake City 23,395 Horizon/ Skywest Q200/CRJ -100 2-3/wk 11,232 1/wk = 21 Las Vegas3 7,891 Charter 737-600 weeks 4,498 Note 1: After examining total market potential, the recommendations for Vancouver are based on the combined results for Vancouver, Abbotsford and all other B.C. with the exception of Kelowna and Victoria. It is believed there is potential for service to both markets. However, passengers traveling to Vancouver are not likely to travel backwards, geographically, to reach Kelowna, which is why these numbers have been broken out. Note 2: Toronto, like a number of other potential markets, would not be sustainable as a destination market. This number includes all markets east of Toronto, including Quebec and the Atlantic provinces. Obviously, service to Toronto could be further stimulated if Air Canada were to provide the service, as the connections to the AC route system would be significant Note 3: Most charter destinations vary greatly from year to year depending on the destinations offered by the tour operators. However, Las Vegas has potential, as it would be a strong candidate for stimulation (more people wanting to fly there) if a non- stop charter service were provided. If scheduled service were to be offered to another U.S. hub destination offering connections to beyond markets, like Seattle, the charter service and the scheduled service would impact one another in terms of load.

Recommendation Area 2: Introduce the long-term air service development strategy to the community and determine support and next steps It is essential the entire community support and be a part of the long term strategy for future air service and industrial development of RARD.

The airport will be successful in attracting new air services with the financial and resource support of various organizations within the community, such as chambers of commerce in the market area, economic development departments of the city, county and province, Tourism Red Deer, the hotel industry, and other major industry sectors.

Engaging the travel agency community will be crucial to developing community support. This could be done in the form of open-houses or tours of RARD, presentations, and regular communication.

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Recommendation Area 3: Prepare proposals and target airlines as outlined in section E.2.4 Securing a commitment from an airline to start a new service will take a great deal of time and perseverance, especially with the larger air carriers. Given the time commitment to prepare and present the airline proposal, the help of an experienced consultant will be beneficial to the prospecting process. The airport should be intimately involved throughout the process and make the presentation themselves to the airlines. Although each proposal should be customized for the targeted carrier, the basic elements will remain the same. The first proposal can serve as a template for those that follow.

Recommendation Area 4: Investment Attraction Marketing to Stimulate Industrial Development at RARD Given the time and resources required to market RARD to a potential airline, the strategy for marketing industrial development opportunities could be approached as follows: Ÿ Create a marketing strategy and plan for industrial development Ÿ Add content to RARD’s website to provide information relevant to industrial development. At a minimum, this should include maps of available land, lists of existing space for lease, servicing. Ÿ Make the most of existing opportunities with RDRED’s website, publications, other materials, and marketing activities. Ÿ specifications, current tenants, a key contact, etc. Ÿ Consider a strategic partnership with a property developer/ manager

Given the serious commercial / industrial land shortage in Red Deer, market conditions should be positive for industrial development at RARD.

Recommendation Area 5: Continue lobbying and applying for funds to improve RARD’s infrastructure Lobbying efforts should continue as success in obtaining funding will improve RARD’s marketability and provide a signal of confidence to investors and airlines. There are many aspects of this study that can assist in the lobbying effort. For example, communicating the level of passenger air service demand and the level of public support for RARD may help lobbying efforts.

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Appendix A: Aircraft and Load Factor Comparison

Aircraft and Load Factor Comparison - based on daily service, 365 days per year. This chart analyses the total number of passengers required to sustain an air service at various load factors. This helps to demonstrate the importance of matching the right aircraft with the total market potent ial of a route and the airline. For example, the WestJet fleet is only comprised of the Boeing 737 jet, of which the 737-600 series is the smallest in terms of seats. Operating a return daily service would require 90% of the total market or 78,183 passengers per year to sustain. Because the Red Deer region does not currently have a single market of that size, it can be concluded that WestJet and their aircraft would be an inappropriate match for this region. However, a smaller jet or a Dash 8 aircraft could be viable. Dornier 388/ Q200/ Beech King Air SAAB DH1 CRJ - Embraer Embraer Aircraft Type Cheyenne 1900 200 Jetstream 340 (Dash) CRJ 100 700 175 Q400 190 737-600 A319 turbo turbo turbo Prop or jet prop prop prop turbo prop turbo prop prop jet jet jet jet jet jet jet Seat Capacity 7 18 12 16 - 19 30 37 40 to 50 70 73 74 93 119 120 1400 1115 Range 1 1500 NM NM 1300 NM 1100 NM 2000 NM NM 978 NM 1941 NM 1500 NM 1610 NM 2200 NM 3500 NM 2760 NM Integra CMA, Alberta Air, Corporate Horizon, Skywest, Horizon, Airlines 2 Integra CMA City Link Swanberg Xpress Jazz Jazz Jazz Jazz/AC Jazz AC Westjet AC Pacific Pacific Alberta Pacific Swanberg Coastal Coastal City Link Coastal Corporate Xpress YVR, B.C. & Regional, B.C. & W. YVR, YYJ, YVR, Pacific YYZ, Charter Destination Suitability Regional Alberta Regional W Canada Alberta Canada NW U.S. YYZ YYJ NW U.S., U.S. destinations YYZ NW W. U.S. Canada Total 1 way seats/yr 2,555 6,570 4,380 5,840 10,950 13,505 14,600 25,550 26,645 27,010 33,945 43,435 43,800 Load Factors - annual 3 1 way seats @ 80% 2,044 5,256 3,504 4,672 8,760 10,804 11,680 20,440 21,316 21,608 27,156 34,748 35,040 2 way seats @ 80% 4,088 10,512 7,008 9,344 17,520 21,608 23,360 40,880 42,632 43,216 54,312 69,496 70,080 1 way seats @ 85% 2,172 5,585 3,723 4,964 9,308 11,479 12,410 21,718 22,648 22,959 28,853 36,920 37,230 2 way seats @ 85% 4,344 11,169 7,446 9,928 18,615 22,959 24,820 43,435 45,297 45,917 57,707 73,840 74,460 1 way seats @ 90% 2,300 5,913 3,942 5,256 9,855 12,155 13,140 22,995 23,981 24,309 30,551 39,092 39,420 2 way seats @ 90% 4,599 11,826 7,884 10,512 19,710 24,309 26,280 45,990 47,961 48,618 61,101 78,183 78,840

See notes on next page

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Notes: All calculations are based on the minimum seat allocation for the aircraft. 1 Range is based on nautical miles as reported by the aircraft specifications by the airline. 2 Airlines represented are only those that could realistically provide service to the Red Deer region. These airlines have a variety of aircraft within their fleets and many other airlines have these aircraft within their fleets. 3 Load factors are estimates based on the airline seat configurations and are calculated on an annual (365 days) basis. This provides an understanding of total seats required to sustain a service. It should be noted this is only to provide an understanding, as the airline would measure profitability against total cost per mile per passenger. One way seats represent outgoing traffic only. 2 way seat calculations have been provided to better understand total seats required for sustainability.

Airport codes: YVR – Vancouver International Airport YYJ – Victoria International Airport YLW – Kelowna International Airport YYZ – Toronto Pearson International Airport

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Appendix B: Destination Analysis

This analysis examines known market potential for the Red Deer region and possible frequency and aircraft scenarios. It demonstrates that certain destinations are more viable when connecting traffic is included. Vancouver is an excellent example of this. This also underlines the importance of matching the right carrier and aircraft for a service. If a Vancouver service was operated by an airline unable to provide connections for passengers, the service would become more marginal as it would rely solely on destination traffic. Likewise, some services require more frequency to make it worthwhile for the passengers to use it, especially for business traffic that rely on options and flexibility when booking tickets. More frequency makes it easier for RARD to ensure the local market would use the service and not drive to Calgary or Edmonton because of the options available. Victoria and Kelowna also demonstrate that by combining markets that make sense, the frequency and aircraft choices improve.

Vancouver Vancouver W. U.S. only w/ other Toronto Hub Victoria Kelowna YYJ + Las Vegas Phoenix Destination (YVR) B.C. (YYZ) Airport (YYJ) (YLW) YLW (LAS) (PHX) Current Market Estimate - annual 22,240 42,020 28,128 23,395 8160 9440 17,600 7891 3887 500 NM Distance from Red Deer (est.) 455 NM 455 NM 1670 NM 437 NM 484 NM 290 NM aprox. 1110 NM 1300 NM 21 weeks - 21 weeks - 4 to 5 / 2 to 3 / 4 to 5 / 2 to 4 / 2 to 4 / 4 to 5 / Nov to Nov to Recommended Frequency to be viable Daily week week week week week week Mar. Mar. Total weekly flights 14 8 to 10 4 to 6 8 to 10 4 to 8 4 to 8 8 to 10 2 2 Total weekly passenger based on market potential 428 808 541 450 157 182 338 376 185 Estimated passengers per flight 31 81-101 90-135 45 - 56 20 - 40 23 - 46 34 - 43 188 93 CMA, Pacific Recommended Potential Carriers None CMA, Jazz Jazz or AC Horizon CMA Integra Coastal, charter charter Pacific Pacific Pacific Coastal Skywest Coastal Coastal CMA, Jazz

6 to 12 12 to 18 up to 2 winter winter Timeline to achieve N/A months months years immediate immediate immediate 2007/08 2008/09

Notes Regarding Market Estimate: The market estimates are from Figure D4. These numbers are treated as return seats. Vancouver - there are two calculations: one demonstrating Vancouver as a destination only market and the other combining all markets in B.C. In both cases, the potential Victoria and Kelowna markets are excluded. Toronto - includes all Toronto and all Canadian destinations east. Seattle - is not a destination that figures prominently in the Red Deer region market. However, this estimate includes destinations throughout the U.S. west coast and Mexico. See pg. 29 for more explanation. Both Las Vegas and Phoenix have been analyzed for potential charter service. It should be noted that air service to Vancouver and/or Seattle could erode this potential passenger base by splitting the market.

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Passenger Airline Service Demand Study and Investment Attraction Strategy

Appendix C: Airport Development Opportunity Profile Note

Opportunity Ø Based on an analysis of other Canadian Airports, the Regional Airport Red Deer Description (RARD) has the following potential business development opportunities: § Ground handling, aircraft maintenance, and other airline support § Multi modal transportation hub, temporary storage, deck loader, free trade zone § Business Park, trade centre/ complex, manufacturing Ø The potential for these opportunities will be greater when passenger airline services, and other comme rcial activities expand at RARD. Ø RARD has a large available land base for development including the Harvard Business Park. Location Regional Airport Red Deer is strategically located along one of North America’s fastest growing economic corridors. RARD’s key advantages include: Ø Close proximity to Highway 2 (QEII) and the city of Red Deer. Ø Trade area of approximately 200,000. Ø Affordable industrial space with room for growth. Market Opportunity Ø Central Alberta has a vibrant tourism industry sector in addition to Alberta’s and Trends traditional economic pillars: oil & gas, agricultural processing, manufacturing, and primary agriculture production. Regional manufacturing is anchored by a world-scale petrochemical facility in nearby Joffre. Several international companies such as Nova Chemicals, BP Canada, and Dow Chemical operate there. Ø Private sector workforce exceeding 100,000 people. Ø A strong p ublic sector workforce that includes Red Deer College and three other colleges with a total enrolment exceeding 18,000 students. Red Deer is also home to the head office of David Thompson Health Region that employs over 4,200 people. Ø The value of building permits in Red Deer for 2006 was a record $282 million - 11.5% higher than the 2005 permit value of $253 million. Ø According to the 2005 City of Red Deer Manufacturing Survey, total manufacturing payroll for Red Deer in 2005 is up 5.13% from 2004. In the same period the number of manufacturing jobs grew by 10.14%. Ø The inventory of public and private sector investments in Red Deer and area, as tracked by Alberta Economic Development, was $541.30 million as of June 2006. This is a 32% increase compared to an inventory value of $410.90 million in June 2004 Ø Population of the Central Region has grown by 6.8% between 2001 and 2004, almost 2% faster than Alberta in general. The population of Red Deer is expected to top 100,000 people by 2011. In Red Deer, inter-provincial migration and immigration accounted for over 80% of the population growth between 2004 and 2005. Contact Ø Merv Phillips: Regional Airport Red Deer: (403) 886-4712 Ø Cyril Cooper: City of Red Deer, (403) 342-8105 Ø Cal Dallas: Red Deer Chamber of Commerce, (403) 347-4491 Ø Deb Bonnet: Red Deer County, (403) 350-2150 Note: The presence of an opportunity is a necessary but not sufficient condition for business success. Successful exploitation of identified opportunities will require the entrepreneur to do further research, have sound business planning skills and judgment, have adequate financial and human resources, and possess good business management skills.

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