PDSC MEETING AGENDA
DATE: 12/11/2019 TIME: 3:00‐5:00 PM RE: Planning and Development Sub‐Committee PDSC Objectives:
Support the development of an updated Strategic Plan and the 2018 Airport Master Plan Update Provide ongoing support and input on specific plans and proposals for the development of Airport Provide input on other business development efforts as appropriate. PDSC Agenda Items: 1) Meeting Minutes Review, October 23rd (attached) 2) Development Design and Land Use Standards – 60 min. (attached) a. Standards and zone boundaries b. Aesthetics and maintenance of existing privately‐owned buildings on leased Airport Property c. Aesthetics and maintenance of Airport‐owned facilities and public areas (ROWs) d. Restrooms 3) Air Service Minimum Revenue Guarantees & Subsides ‐ 25 min. (attached) a. Minimum Revenue Guarantees & Subsides i. Cheyenne case study b. Market Demand 4) Remote Tower ‐ 20 min. (attached) a. Current schedule b. Air traffic control continuity c. Funding sources 5) Open Discussion – 15 min.
MEETING RECORD Page 1
DATE: 10/23/2019 TIME: 03:30-05:00 PM RE: Planning and Development Sub-Committee Meeting ATTENDEES: Tom Fleming, Jason Licon, Diane Jones, Robert Middleton, James Hays, Aaron Ehle
Begin Meeting Record Jason Licon introduced and welcomed new members of the PDSC Mr. James Hays and Robert Middleton. Agenda Item #1: Meeting Minutes Review – September 25th • Tom asked if Diane’s comment was added to August 28th meeting record. Jason verified that it was. • James moved to approve the minutes. The motion, seconded by Tom passed unanimously. Agenda Item #2: Master Plan Feedback from Planning Commissions • Master Plan update was presented at Loveland Planning Commission, Fort Collins Planning and Zoning Board, and Larimer County Planning Commission meetings. • Presentation focused on Airport Influence Area analysis and recommendations and the Concept Development Plan (CDP). • Questions and feedback are summarized in the meeting packet. • PDSC Comments: o Airport needs to be leveraged to attract complementary development in the AIA. o Airport needs to develop a marketing/public relations strategy. . Destination Marketing – attract visitors to Northern Colorado • Will schedule meeting with visitor services/tourism representatives. . Economic Development – attract targeted businesses to Airport and AIA st o CDP was approved by the Airport Commission on Oct 21 . o Focus for next 5 years – design and construct terminal, widen runway 15-33 Agenda Item #3: Master Plan – Staffing Needs • The Airport has received approval to add an additional operations and maintenance position – may be delayed until air service return. • Intern from CDOT Aeronautics program will likely also be added. • Long-term staffing strategy needs to be developed. o Airport needs sufficient staff to allow Jason to focus on high level management responsibilities. Agenda Item #4: Discovery Air Stormwater • Developer of Discovery Air has proposed a drainage plan that includes stormwater from a portion of the Brands West development flowing through the Discovery Air site and into the Airport’s drainage network. o The proposed plan deviates substantially from the Airport Drainage Basin Master Plan Update that was completed in 2008. o Additional analysis is required in order to understand the impacts of the proposed plan on the Airport’s drainage system. Agenda Item #5: Remote Air Traffic Control Working Group • Diane has been working with Bill Payne and Mayor Troxell to coordinate a January 14-16, 2020 event with EUROCAE, an organization that develops international standards for the aviation industry. • 45-50 attendees expected. MEETING RECORD Page 2
• Visit Fort Collins will support the event. • Bus service to and from the Airport from Fort Collins needs to be arranged. Agenda Item #6: Groome Transportation Update • Groome parking lot will be relocated to the mill lot east of the terminal parking lot. The Airport is installing lighting and a shelter. Agenda Item #7: Open Discussion • City of Loveland Senior Planner Troy Bliss will be replacing Mike Scholl • The Airport has issued a request for statements of qualifications for engineering and architectural services for up to a five year period. End Meeting Record ITEM NUMBER: 2 MEETING DATE: December 11, 2019 PREPARED BY: Aaron Ehle, Planning and Business Development Specialist
TITLE Airport Development Design & Land Use Standards
RECOMMENDED PDSC ACTION Review and Advise
SUMMARY As the area around the Airport continues to grow, public and private investment at the Airport is expected to increase. New general aviation hangars are currently being built and construction is expected to begin on more units in the near future. A new terminal facility is also likely to be built soon. With all of this activity, developing the Airport’s property in a responsible and attractive manner will be an increasingly important focus.
Members of the Airport Commission have expressed a desire for higher-quality development, especially in highly visible and visited areas of the Airport. There have been delays in recent development approvals due to aesthetic concerns. The need for a more comprehensive land use strategy has also been identified.
In February, at the direction of the Commission, a working group consisting of planning and development staff from both cities and airport staff was formed to address these issues and develop potential solutions. In April, a white paper that summarized research, presented options, and made a recommendation was presented to the Commission. Since that time, the group has worked with the PDSC, Airport stakeholders, and the Airport’s legal liaison to develop standards to accomplish identified goals while being mindful of potential negative impacts on developers.
At the 11/18 Airport Commission meeting, airport staff presented the development design and land use standards for possible adoption. While the Commission viewed the standards as a good step to improving aesthetics and addressing land use, a number of other considerations that relate to the discussion were brought up. The Commission provided direction to revise the development design and land use standards where
Northern Colorado Regional Airport Planning & Development Subcommittee possible to address these topics and to examine additional ways to deal with these challenges. The topics are presented in the attached discussion outline.
ATTACHMENTS Discussion Outline Development Design and Land Use Standards Presentation (Reference) Proposed Development Design and Land Use Standards Potential Public Restroom Site Map
Northern Colorado Regional Airport Planning & Development Subcommittee Page 2 of 2
Discussion Outline – Development Design & Land Use
1) Standards and zone boundaries Questions o Are there any standards that need to be added, removed, or modified? o Are the zone boundaries appropriate or do they need to be adjusted in order to achieve aesthetic and land use goals?
2) Aesthetics and maintenance of existing privately-owned buildings on leased Airport Property Background o Improvements on leased land depreciate over the term of the lease. As time goes by, tenants have decreasing incentive to invest in improvements and maintenance. o Reversion clause - By the time the lease expires and the Airport gains ownership of the improvements, they are usually visually unappealing and poorly maintained. o Once the Airport owns the improvements, it can lease them out, generating much more revenue per square foot than simple land leases. Question/options o How can hangar owners be incentivized to maintain and invest in their hangars? Through lease agreements Leases can be amended if both parties agree to lower rent or extend term, but there are revenue consequences for the Airport. Conditions can’t be added to leases when they are transferred. Airport cost sharing Airport allocates funding for cost-sharing of improvements. Percentage of cost sharing tied to years remaining on lease.
3) Aesthetics and maintenance of Airport-owned facilities and public areas (ROWs) Background o The cities have traditionally relied on the private sector for hangar development and maintenance. o Resources to maintain and improve airport-owned facilities and public areas have been insufficient.
Northern Colorado Regional Airport Planning & Development Subcommittee
Resulting in modular facilities, portable restrooms, streets without curbs/gutters/sidewalks, sparse landscaping. Questions/options o How can the Airport/cities lead by example by improving their facilities and highly visible public areas to create a new image? Identify improvement projects that are not eligible for FAA funding and identify ways to fund them through the capital improvement plan (CIP). Invest in Airport-owned hangars Redevelopment starting with oldest t-hangars. Offset lost hangar space and revenue by building new hangars or shelters in undeveloped areas. o How do we balance investment in aesthetics with investment in infrastructure to create an environment that is attractive for private development?
4) Restrooms Background o Most of the existing private hangars do not have restrooms. There are several portable restrooms (only one is paid for by the airport) on airport property. o Businesses are required to have restrooms for their customers during business hours. JetCenter’s restrooms are open 24/7. o Building code requires that all new hangars have restrooms or 24/7 access to a restroom within 1,000 ft. o In addition to added construction costs associated with building restrooms, a water+sewer tap costs approximately $50,000. Each building requires its own tap. This has discouraged some hangar development. Questions/options o Would it make sense for the Airport to build and maintain a public restroom so hangars can be built without restrooms and portable restrooms can be removed? The Airport would likely have to charge higher lease rates for hangars that benefit from not having to build restrooms in order to recoup costs and pay for maintenance. Map of one potential public restroom site attached. o How can developers be incentivized to include public restrooms in their facilities? Through lease agreements incentives Airport cost sharing Public restrooms need to be in strategic locations
Northern Colorado Regional Airport Planning & Development Subcommittee Page 2 of 2
Development Design and Land Use Standards Issue/Background Airport is in an industrial zoning district with no design standards pertaining to aesthetic improvements. Recent development proposals have struggled to obtain approval due to aesthetic concerns. Airport needs a more cohesive land use strategy to ensure the highest and best use of property and guide orderly development. Developers want clarity early in the process. Increased standards may discourage certain types of development. Collaborative Effort Working Group . Jason Licon – Airport Director . Aaron Ehle – Airport Planning and Development Specialist . Troy Bliss – Senior Planner, Loveland . Tom Leeson - Community Development & Neighborhood Services Director, Fort Collins Research . Conducted online research to identify airports with design and land use standards. • 20 regional and municipal airports were studied . City of Loveland Unified Development Code • Contains design standards for zoning districts . Airport Cooperative Research Program • Guidebook for Developing and Leasing Airport Property Feedback . Airport Commission – April meeting • Presented white paper, presented three options, and made a recommendation . PDSC – Multiple meetings . Developers and Airport stakeholders . Airport legal liaison Goals
Enhance aesthetic value through consistent, attractive, and compatible development Protect property values, enhance investment, and encourage further development Create a design theme for the Airport by encouraging certain unifying components through building design, landscaping, signage, and other elements. Identify appropriate sites for potential developments and reserve space for forecasted aviation activity in accordance with the Airport Master Plan and Airport Layout Plan (ALP) Recommended Approach Identify zones and create standards specific to each . Identify areas in which certain types of development would be targeted based on the Airport Layout Plan. . Design standards would be established for each zone based on use/activity and the visibility of the area. . Pros • Tailored design standards based on use and visibility. • Incorporation of common design elements in order to establish a theme/identity for the Airport • Can be adjusted as future needs/preferences change. . Cons • Higher costs for development in zones with higher standards • More complicated development review and approval process Land Use Standards Zone 1 – Existing and new general aviation hangars (mostly Airplane Design Group I) Zone 2 - Aviation-related businesses, Fixed-Base Operators, Specialized Aviation Service Operators, Existing and new general aviation hangars, Corporate hangars (Mostly Airplane Design Group II and higher) Zone 3 – Terminal, Terminal Support facilities, Retail, Commercial Service Providers Design Standards
Zone 1 – Basic standards with few aesthetic requirements Zone 2 - Similar to arterial industrial standards Zone 3 – Similar to building standards that apply in commercial areas Comments/Questions?
Development Land Use and Design Standards
Northern Colorado Regional Airport (FNL) is a major gateway to the Northern Front Range for regional commerce and tourism. The Airport should impart a positive and memorable impression on its passengers, visitors, tenants, and the community. The purpose of the Development Land Use and Design Standards is to establish minimum required standards for development at the Airport, and to ensure that new projects will be consistent with the following goals: Enhance aesthetic value through consistent, attractive, and compatible development Protect property values, enhance investment, and encourage further development Create a design theme for the Airport by encouraging certain unifying components through building design, landscaping, signage, and other elements. Identify appropriate sites for potential developments and reserve space for forecasted aviation activity in accordance with the Airport Master Plan and Airport Layout Plan (ALP) These Standards are intended to convey general design direction to developers and designers, and to serve as criteria for the approval of proposed projects by the Northern Colorado Regional Airport Commission (NCRAC). The NCRAC recommends adherence to the Standards so far as can be reasonably achieved and has the authority to interpret the intent of the Standards with regard to proposed developments on an individual basis.
Zone 1 Standards______Zone 1 Predominant Land Uses: Existing and new general aviation hangars (mostly Airplane Design Group I) Zone 1 Design Standards: A. Generally. The standards of this Section are intended to promote consistent, high-quality development in Zone 1, which is primarily comprised of private aircraft hangars. B. Applicability. The standards of this Section shall apply to all new development and construction of improvements located in Zone 1 as identified by Attachment 1: Airport Development Zones Map. C. Codes/Ordinances. All development on Airport property shall conform to requirements contained in the currently adopted codes and ordinances of the City of Loveland including, but not limited to: Title 13 – Utilities Title 15 – Buildings and Construction Title 18 – Unified Development Code. In the case of conflict between Division 18.04.05, Building Design Standards, and the standards of this Section, the standards of this Section shall prevail. D. Discretionary Waiver of Development Design and Land Use Standards. The Airport Commission has the authority to grant waivers to the standards of this Section by an affirmative vote of the majority of the members (four votes).
E. Roofing Materials. Roofing materials that produce glare or other effects that are hazardous to aircraft operation shall not be permitted. F. Rooftop Mechanical Units. 1. Roof top mechanical units and other miscellaneous rooftop equipment shall be substantially screened from view from public rights-of-way and other public places. 2. Screening material shall be of the same or comparable material, texture, and color as the material used for cladding the building. 3. Screening shall be constructed as an encompassing monolithic unit, rather than as individual screens. Multiple equipment screens, or “hats”, surrounding individual elements shall not be permitted. 4. The height of the screening element shall equal or exceed the height of the structure’s tallest piece of installed equipment. G. Loading Docks; Trash or Recycling Storage and Pickup Areas. 1. No loading dock or trash or recycling storage and pickup area shall be located on the principal street-facing or apron-facing facade of the building unless such facade is set back at least 150 feet from the street or apron and screened from view by a type C bufferyard. 2. Any loading dock or trash or recycling storage and pickup area that is located on the side or rear wall of the building shall be screened in accordance with the following requirements. a. Loading areas shall be screened from principal building entrances and other highly visible areas of the subject property. b. Loading areas shall be of sufficient size to accommodate vehicles that will serve the use, such that all backing and maneuvering to and from loading areas is done on the subject property, and egress of vehicles from the subject property is in a forward direction. c. The location of the loading area shall not block or obstruct any public street, alley, driveway, or sidewalk. 3. If the subject property has multiple street-facing or apron-facing frontages, loading docks and trash or recycling pickup areas shall be located in the least obtrusive manner, with preference for sides of the building that do not face streets or apron areas, then for sides that are set back more than 150 feet, and if such location is not practicable, the frontage with the least public visibility. H. Exterior Illumination. 1. Lighting shall be designed to complement the overall design of the development. Minimum site lighting shall be maintained in order to provide safety and security throughout the development. 2. Both wall and light pole mounted light fixtures shall be utilized where appropriate, and shall be fully shielded and/or directed to avoid any interference with aircraft operations. 3. The following are not allowed: a. Illumination that highlights the entire width of a building elevation, or a significant portion of a building elevation; and b. Back-lit translucent awnings. c. Blinking or Flashing lights unless approved by the Airport Director.
I. Fences, Walls, and Barriers. All fences, walls, and other barriers must comply with Airport security requirements and materials must be approved by the Airport Director.
Zone 2 Standards______Zone 2 Predominant Land Uses: Aviation-related businesses, Fixed-Base Operators, Specialized Aviation Service Providers, Existing and new general aviation hangars, Corporate hangars (Mostly Airplane Design Group II and higher) Zone 2 Design Standards: A. Generally. The standards of this Section are intended to promote high-quality development in Zone 2, where businesses operate and buildings are adjacent to streets or aircraft apron areas and therefore have an impact on the image and character of the Airport and the Cities. These standards may require changes including, but not limited to, modifications to roofs, windows, doors, building mass, materials, colors, and inclusion of architectural features and details. B. Applicability. The standards of this Section shall apply to all new development and construction of improvements located in Zone 2 as identified by Attachment 1: Airport Development Zones Map. C. Codes/Ordinances. All development on Airport property shall conform to requirements contained in the currently adopted codes and ordinances of the City of Loveland including, but not limited to: Title 13 – Utilities Title 15 – Buildings and Construction Title 18 – Unified Development Code. In the case of conflict between Division 18.04.05, Building Design Standards, and the standards of this Section, the standards of this Section shall prevail. D. Discretionary Waiver of Development Design and Land Use Standards. The Airport Commission has the authority to grant waivers to the standards of this Section by an affirmative vote of the majority of the members (four votes). E. Design Integration. 1. Building design shall contribute to the special or unique characteristics of an area and/or development through building massing and scale, building materials, architectural elements, and color palette. 2. Design integration shall be achieved through any combination of techniques, such as the repetition of roof lines, the use of comparable proportions in building mass and outdoor spaces, comparable relationships to the street, comparable window and door patterns on street-facing facades, or the use of building materials that have color shades and textures that are comparable to or complimentary to those existing on, or in the immediate area of, the subject property. 3. Where there is no established or consistent area character or unifying theme, or where it is not desirable to reinforce the existing character because it does not reflect a design theme that is consistent with the architectural standards as described in this Division, the proposed development shall be designed to establish an attractive image and set a standard of quality for future development. F. Building Colors. 1. Colors shall be used to blend buildings into their context, and to unify different elements of a development. Color should complement the surrounding area and, if in a new development
area, shall be selected to establish an attractive image and set a standard of quality for future developments and buildings within the area. 2. Buildings that are larger than 10,000 square feet shall be finished with more than one color on all elevations that are visible from public streets or aircraft apron areas. 3. Accent colors that are used to call attention to a particular feature or portion of a building, or to form a particular pattern, shall be compatible with the predominant building base colors. Accent colors shall cover no more than five percent of a street-facing building elevation. G. Metal Cladding and Finishes. 1. Metal wall panels with exposed fasteners (e.g., wall panels commonly referred to as “R-Panel,” “U-Panel,” “Corrugated Panel,” “7.2 Panel,” or “Standing Seam Panel,” and other comparable panel systems), and metal wall panels with hidden fasteners that have a corrugated appearance that resembles the typical exposed fastener panels described above, combined, shall not cover more than 80 percent of building elevations that face streets or aircraft apron areas. 2. Insulated architectural metal wall panels with hidden fasteners are allowed without limitation, provided that they do not have a corrugated appearance that resembles the typical exposed fastener panels described in subsection G.1., above. Figure 2.1 Illustrative Metal Cladding Types
The metal panel on the left-hand side is an illustrative 7.2 Panel. This panel would be subject to the limitations of subsection G.1. The metal panel on the right-hand side is an illustrative architectural insulated metal panel with hidden fasteners and a smooth finish. This panel would be allowed without limitation pursuant to subsection G.2.
3. The Airport Commission may permit other metal cladding or finishes, such as bronze, brass, copper, or wrought iron, if a determination is made that such materials are equal or superior to the primary building materials. H. Roofing Materials. Roofing materials that produce glare or other effects that are hazardous to aircraft operation shall not be permitted. I. Rooftop Mechanical Units.
1. Roof top mechanical units and other miscellaneous rooftop equipment shall be substantially screened from view from public rights-of-way and other public places. 2. Screening material shall be of the same or comparable material, texture, and color as the material used for cladding the building. 3. Screening shall be constructed as an encompassing monolithic unit, rather than as individual screens. Multiple equipment screens, or “hats”, surrounding individual elements shall not be permitted. 4. The height of the screening element shall equal or exceed the height of the structure’s tallest piece of installed equipment. J. Primary Building Entrances. 1. Primary public entrances shall be clearly defined and recessed or projected, or framed by elements such as awnings, arcades, porticos, or other comparable architectural features. 2. Primary public entrances shall be connected to automobile parking areas by sidewalks that meet Americans with Disabilities Act (ADA) Standards for Accessible Design. K. Loading Docks and Trash or Recycling Storage and Pickup Areas. 1. No loading dock or trash or recycling storage and pickup area shall be located on the principal street-facing or apron-facing facade of the building unless such facade is set back at least 150 feet from the street or apron and screened from view by a type C bufferyard. 2. Any loading dock or trash or recycling storage and pickup area that is located on the side or rear wall of the building shall be screened in accordance with the following requirements. a. Loading areas shall be screened from principal building entrances and other highly visible areas of the subject property. b. Loading areas shall be of sufficient size to accommodate vehicles that will serve the use, such that all backing and maneuvering to and from loading areas is done on the subject property, and egress of vehicles from the subject property is in a forward direction. c. The location of the loading area shall not block or obstruct any public street, alley, driveway, or sidewalk. 3. If the subject property has multiple street-facing or apron-facing frontages, loading docks and trash or recycling pickup areas shall be located in the least obtrusive manner, with preference for sides of the building that do not face streets or apron areas, then for sides that are set back more than 150 feet, and if such location is not practicable, the frontage with the least public visibility. L. Exterior Illumination. 1. Lighting shall be designed to complement the overall design of the development. Minimum site lighting shall be maintained in order to provide safety and security throughout the development. 2. Both wall and light pole mounted light fixtures shall be utilized where appropriate, and shall be fully shielded and/or directed to avoid any interference with aircraft operations. 3. The following are not allowed: a. Illumination that highlights the entire width of a building elevation, or a significant portion of a building elevation; and b. Back-lit translucent awnings.
c. Blinking or Flashing lights unless approved by the Airport Director. M. Signage. Identification signage should contribute to the architectural design of the building in style, material, color, architecture and composition. Site specific identification signs shall be constructed with similar architectural style, materials and colors as the principal structure and shall be compatible with other signs within the larger development. N. Landscaping. 1. A landscaping plan must be approved by the Airport Director prior to installation. Landscaping materials that attract birds or other wildlife will not be permitted near aircraft movement areas. 2. Landscaping materials are to be installed within ninety (90) days of the date of occupancy of the building. Seasonal exemptions may be granted by the Airport Director. If seasonal conditions do not permit planting, interim erosion control may be required by the Airport Director. O. Fences, Walls, and Barriers. All fences, walls, and other barriers must comply with Airport security requirements and materials must be approved by the Airport Director.
Zone 3 Standards______Zone 3 Predominant Land Uses: Terminal, Terminal Support facilities, Retail, Commercial Service Providers Zone 3 Design Standards: A. Generally. The standards of this Section are intended to promote consistent, high-quality development in areas of the Airport that are most publicly visible and visited. Accordingly, the Airport Commission may require prototypical or franchise architecture to be modified to meet these standards. Such changes may include, but are not limited to, modifications to roofs, windows, doors, building mass, materials, building colors, and placement of architectural features and details. Franchise architectural styles found to meet the standards of this Section will not require modification. B. Applicability. The standards of this Section shall apply to all new development and construction of improvements located in Zone 3 as identified by Attachment 1: Airport Development Zones Map. C. Codes/Ordinances. All development on Airport property shall conform to requirements contained in the currently adopted codes and ordinances of the City of Loveland including, but not limited to: Title 13 – Utilities Title 15 – Buildings and Construction Title 18 – Unified Development Code. In the case of conflict between Division 18.04.05, Building Design Standards, and the standards of this Section, the standards of this Section shall prevail. D. Discretionary Waiver of Development Design and Land Use Standards. The Airport Commission has the authority to grant waivers to the standards of this Section by an affirmative vote of the majority of the Commission members (four votes). E. Design Integration. 1. Building design shall contribute to the special or unique characteristics of an area and/or development through building massing and scale, building materials, architectural elements, and color palette. 2. Design integration shall be achieved through any combination of techniques, such as the repetition of roof lines, the use of comparable proportions in building mass and outdoor spaces,
comparable relationships to the street, comparable window and door patterns on street-facing facades, or the use of building materials that have color shades and textures that are comparable to or complimentary to those existing on, or in the immediate area of, the subject property. 3. Where there is no established or consistent area character or unifying theme, or where it is not desirable to reinforce the existing character because it does not reflect a design theme that is consistent with the architectural standards as described in this Division, the proposed development shall be designed to establish an attractive image and set a standard of quality for future development. F. Building Design. All buildings shall be designed and maintained using the following building elements, with a minimum of one item each selected from four of the five groups below: 1. Group 1 – Exterior Wall Articulation. a. Openings or elements simulating openings that occupy at least 20 percent of the wall surface area (excluding overhead or loading dock doors); or b. Building bays created by columns, ribs, pilasters or piers or an equivalent element that divides a wall into smaller proportions or segments with elements being at least one foot in width, a minimum depth of eight inches, and spaced at intervals of no more than 25 percent of the exterior building walls. For buildings over 20,000 sf. in gross floor area, such elements shall be at least 18 inches in width, with a minimum depth of 12 inches, and spaced at intervals of no more than 20 percent of the width of the exterior building walls; or c. A recognizable base treatment of the wall consisting of thicker walls, ledges, or sills using integrally textured and colored materials such as stone, masonry, or a decorative concrete; or d. Some other architectural feature that breaks up the exterior horizontal and vertical mass of the wall in a manner equivalent to subsections F.1.a., b., or c., above. 2. Group 2 – Roof Articulation. a. Changes in roof lines, including the use of stepped cornice parapets, a combination of flat and sloped roofs, or pitched roofs with at least two roof line elevation changes; or b. Some other architectural feature or treatment that breaks up the exterior horizontal and vertical mass of the roof in a manner equivalent to subsection F.2.a., above. 3. Group 3 – Building Openings, Walkways and Entrances. a. Canopies or awnings over at least 30 percent of the openings of the building; or b. Covered walkways, porticos, or arcades covering at least 30 percent of the horizontal length of the primary street-facing building elevation; or c. Raised cornice parapets over entries; or d. Some other architectural feature or treatment that adds definition to the building openings, walkways or entrances in a manner equivalent to subsection F.3.a., b., or c., above. 4. Group 4 – Cladding Materials. a. At least two kinds of materials distinctively different in texture or masonry pattern, at least one of which is decorative block, brick or stone, with each of the required
materials covering at least 25 percent of the exterior walls (excluding the areas of windows, doors, and overheard doors) of the building; or b. Brick or stone (including synthetic stone) covering at least 50 percent of the exterior walls (excluding the areas of windows, doors, and overheard doors) of the building. 5. Group 5 – Other Architectural Definition. a. Overhanging eaves extending at least 24 inches past the supporting walls, or with flat roofs, cornice parapets or capstone finish; or b. Ornamental lighting fixtures (excluding neon) for all exterior building lighting; or c. Other features that add architectural definition to the building, in a manner equivalent to subsection F.5.a., or b., above. G. Design Continuity in Multi-Building Developments. Developments with multiple buildings shall include predominant characteristics in each building so that the buildings within the development appear to be part of a cohesive, planned area, yet are not monotonous in design. Predominant characteristics may include use of the same, similar, or complimentary architectural style, materials, and colors. H. Articulation of Walls. No horizontal width of building wall shall run for more than 100 feet without a wall plane projection or recess having a depth of at least four percent of the length of the building elevation, extending for a distance that is not less than 20 percent of the width of the building elevation. I. Building Colors. 1. Colors shall be used to blend buildings into their context, and to unify different elements of a development. Color should complement the surrounding area and, if in a new development area, shall be selected to establish an attractive image and set a standard of quality for future developments and buildings within the area. 2. Buildings that are larger than 10,000 square feet shall be finished with more than one color on all elevations that are visible from public streets or aircraft apron areas. 3. Accent colors that are used to call attention to a particular feature or portion of a building, or to form a particular pattern, shall be compatible with the predominant building base colors. Accent colors shall cover no more than five percent of a street-facing building elevation. J. Metal Cladding and Finishes. 1. Metal wall panels with exposed fasteners (e.g., wall panels commonly referred to as “R-Panel,” “U-Panel,” “Corrugated Panel,” “7.2 Panel,” and other comparable panel systems), and metal wall panels with hidden fasteners that have a corrugated appearance that resembles the typical exposed fastener panels described above, combined, shall not be used as cladding on any building wall. 2. Standing seam metal panels may be used for cladding on not more than 25 percent of any building wall (exclusive of windows, doors, and overhead doors), provided that they integrate into the architectural style and color of the building. 3. Insulated architectural metal wall panels with hidden fasteners are allowed without limitation, provided that they do not have a corrugated appearance that resembles the typical exposed fastener panels described in subsection J.1., above. 4. The Airport Commission may permit other metal cladding or finishes, such as bronze, brass, copper, or wrought iron, if a determination is made that such materials are equal or superior to the primary building materials.
K. Roofing Materials. Roofing materials that produce glare or other effects that are hazardous to aircraft operation shall not be permitted. L. Rooftop Mechanical Units. 1. Roof top mechanical units and other miscellaneous rooftop equipment shall be substantially screened from view from public rights-of-way and other public places. 2. Screening material shall be of the same or comparable material, texture, and color as the material used for cladding the building. 3. Screening shall be constructed as an encompassing monolithic unit, rather than as individual screens. Multiple equipment screens, or “hats”, surrounding individual elements shall not be permitted. 4. The height of the screening element shall equal or exceed the height of the structure’s tallest piece of installed equipment. M. Primary Building Entrances. 1. Primary public entrances shall be clearly defined and recessed or projected, or framed by elements such as awnings, arcades, porticos, or other comparable architectural features. 2. Primary public entrances shall be connected to automobile parking areas by sidewalks that meet Americans with Disabilities Act (ADA) Standards for Accessible Design. N. Loading Docks and Trash or Recycling Storage and Pickup Areas. 1. No loading dock or trash or recycling storage and pickup area shall be located on the principal street-facing or apron-facing facade of the building. 2. Any loading dock or trash or recycling storage and pickup area that is located on the side or rear wall of the building shall be screened in accordance with the following requirements. a. Loading areas shall be screened from principal building entrances and other highly visible areas of the subject property. b. Loading areas shall be of sufficient size to accommodate vehicles that will serve the use, such that all backing and maneuvering to and from loading areas is done on the subject property, and egress of vehicles from the subject property is in a forward direction. c. The location of the loading area shall not block or obstruct any public street, alley, driveway, or sidewalk. 3. If the subject property has multiple street-facing or apron-facing frontages, loading docks and trash or recycling pickup areas shall be located in the least obtrusive manner, with preference for sides of the building that do not face streets or surface parking lots (except employee-only parking lots), then for sides that are set back more than 150 feet, and if such location is not practicable, the frontage with the least public visibility. O. Exterior Illumination. 1. Lighting shall be designed to complement the overall design of the development. Minimum site lighting shall be maintained in order to provide safety and security throughout the development. 2. Both wall and light pole mounted light fixtures shall be utilized where appropriate, and shall be fully shielded and/or directed to avoid any interference with aircraft operations. 3. The following are not allowed:
a. Illumination that highlights the entire width of a building elevation, or a significant portion of a building elevation; and b. Back-lit translucent awnings; and c. Blinking or Flashing lights unless approved by the Airport Director. P. Signage. Identification signage should contribute to the architectural design of the building in style, material, color, architecture and composition. Site specific identification signs shall be constructed with similar architectural style, materials and colors as the principal structure and shall be compatible with other signs within the larger industrial development. Q. Landscaping. 1. A landscaping plan must be approved by the Airport Director prior to installation. Landscaping materials that attract birds or other wildlife will not be permitted near aircraft movement areas. 2. Landscaping materials are to be installed within ninety (90) days of the date of occupancy of the building. Seasonal exemptions may be granted by the Airport Director. If seasonal conditions do not permit planting, interim erosion control may be required by the Airport Director. R. Fences, Walls, and Barriers. All fences, walls, and other barriers must comply with Airport security requirements and materials must be approved by the Airport Director.
Airport Development Zones ROCKWELL AVE
Airline
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A Terminal
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A Remote Tower EARHART RD
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Professional Airport N Aircraft Administration Services
The Flying School T N S MA jetCenter UM GR
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N
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L E A R R D D SNA S ES T R C A
T G S T S W AF G The New Leading CR I H E G C EE R E B Edge Flight W R I Avionics T N
Training D G Specialists R D
R ST OP THR OR The New N Firewall TransAero Forward CT AM Helicopers TRE LFS Police Training Campus GU
ST AN ARM STE
T S S RU Wildfire Air CIR Tanker Base
Discovery Air
U N IO N P A C IF IC R A IL R O A D
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Aircraft Movement Reserve Planned Airside Pavement Zone 1
Airport Boundary Planned Vehicle Parking Zone 2 0 250 500 1,000 Feet Planned Building Planned Road Zone 3 K 1,000 feet
1,000 feet
Existing Public Restroom in jetCenter
500 feet
500 feet
Potential Public Restroom Site
Potential Public Restroom Site
Potential Public Restroom Site 500 ft. Radius Land Available for Development 1000 ft. Radius K ITEM NUMBER: 3 MEETING DATE: December 11, 2019 PREPARED BY: Jason Licon, Airport Director
TITLE Air Service Minimum Revenue Guarantees & Subsides
RECOMMENDED PDSC ACTION Informational
INTRODUCTION This memo includes information on the use of air service incentives including Minimum Revenue Guarantees (MRG), Essential Air Service, and airline subsidies in attracting and retaining new air service. Special emphasis is provided on how these situations may benefit the Northern Colorado Regional Airport (FNL) in seeking a new carrier. Revenue Guarantees and Airline Subsidies can be helpful or necessary for some airports to attract new air service from air carriers in certain situations, however airports are prohibited in providing them directly. Allegiant Airlines did not require a MRG or subsidies to begin their postponed service offering at FNL.
BACKGROUND Minimum Revenue Guarantees: Communities seeking to establish a MRG should be cognizant of several factors in order to successfully utilize this air service incentive. Communities must identify appropriate funding sources, obtain specific pledges to the fund, negotiate a positive air service agreement for the community including MRG and other incentives, and hold the MRG funds in escrow for the length of the air service agreement. Throughout this process, prominent officials in the community must maintain and grow community support and educate the public about the incentives, including MRG. Acceptable Funding Sources: Airports are precluded from contributing airport generated revenue resources to a MRG to maintain compliance with Federal Grant Assurance No. 25. This grant assurance is a condition of acceptance of federal funding, is agreed to by the Cities, and requires airport revenues be expended only for the capital and operating costs of the airport. However, there are resources including some state and federal grants that may be used for a MRG including the US Department of Transpiration (DOT) Small community Air Service Development Program (SCASDP), and the Essential Air Service Program (EAS). Additionally, local businesses, chambers of commerce, and area communities who would receive economic benefit by the presence of new air service can, and historically do, contribute to a MRG fund. Examples of this include ski resorts in Colorado that provide funding to airlines operating at
Northern Colorado Regional Airport Planning & Development Subcommittee Colorado airports including Telluride, Montrose, Eagle‐Vail, & Steamboat‐Hayden. Airports are allowed to provide incentives to air carriers through the use of introductory rates or waivers and marketing assistance to air carriers. These incentives have been used with success at FNL where the Airport/ Cities provided up to $30,000 in co‐branded marketing assistance combined with six months of fee waivers to assist with the startup of a new route. These marketing and fee waiver incentives were provided to Allegiant in 2003 for the Las Vegas route and again in 2010 for Phoenix‐Mesa. Small Community Air Service Development Program & Essential Air Service Program: The Small Community Air Service Development Program (SCASDP) is a grant program administered through the USDOT and can be used as a source of funding for a revenue guarantee and other financial incentives. This program is available to airports defined by the Federal Aviation Administration (FAA) as small‐hub or non‐hub airports, and has historically been funded at a level of approximately $10 million annually. FNL qualifies under these criterion and has previously received a grant for the purpose of marketing existing air service through Allegiant in 2011 and conducted a feasibility study for a program referred to as “Wingless Flight.” The FNL grant found the inability to overcome security concerns at Denver International Airport for such a program to be successful, and utilized the funding to begin building a market study to identify air carrier demands and opportunities. The Essential Air Service (EAS) program is also administered through the USDOT and is used to provide direct subsidies to air carriers to airports that are at least 90 miles or more from a FAA classified Large of Medium Hub airport. The FNL Airport does not qualify for this program, as it is within this 90‐mile exclusion zone proximate to the Denver International Airport.
SUMMARY Each of the above attributes alone will not guarantee success, as they do not factor in sustainability of the service. Furthermore, the Airport is not able to fund revenue guarantees or subsidies, and can only provide introductory rate waivers and/or marketing assistance. Selecting route that has high regional demand and forming a strategy using some or all of the above attributes is necessary for future success. FNL has identified and proven the demand for air travel necessary to support year round air travel as shown by previous air service providers. The use of MRG or subsidies could expedite FNL’s success with attracting reliable air service, however; based on market research on regional air service demand the Airport is likely to attract air service without the use of MRG or subsidies to air carriers. Factors that are currently limiting success with air service include infrastructure elements including air traffic control and passenger facilities.
ATTACHMENTS Air Service Minimum Revenue Guarantees & Subsides Extended Memo Cheyenne Case Study (Reference) Passenger Demand Analysis (Reference) Colorado Springs Comparison
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DATE: November 15, 2019 TO: Northern Colorado Regional Airport Commission FROM: Jason R. Licon, Airport Director RE: Air Service Minimum Revenue Guarantees & Subsidies
Introduction This memorandum outlines historical information regarding the use and challenges associated with an air service incentive Minimum Revenue Guarantees (MRG) in attracting and retaining new air service. Special emphasis is provided on how these situations can benefit the Northern Colorado Regional Airport (FNL) in seeking a new carrier to provide regular service. Incentives vary widely from one airport to the next, and there is no one size fits all approach to attracting air service to an airport. The resounding critical component of any successful program is community support. Air Service Incentive An incentive is any fee reduction, fee waiver, or use of airport revenue for acceptable promotional costs, where the purpose is to encourage an air carrier to increase service at the airport. Incentives are a temporary assistance, usually to help defray the costs for new service when entering an uncertain market and limited by a specific amount of time (i.e. first six months of service, first year, etc…). Incentives may not: Guarantee gross passenger revenue Guarantee ticket sales Influence ticket prices Include direct payments to carriers from airport revenue Offer incremental discounts based on weight for existing service Offer incentives based on incremental weight or increased number of seats on existing flights. i MRG vs. Air Service Subsidy A subsidy is an ongoing direct payment of airport revenue to a carrier or to any provider of goods or services to that carrier, in exchange for service by the carrier. Air service that requires a subsidy are typically not sustainable without it. Direct subsidies paid to air carriers from the airport are prohibited by the Revenue Use Policy because the FAA does not consider it a legitimate cost to operate an airport.ii Examples of a subsidy is the ongoing support paid by the Vail Resorts group to air carriers for service at Eagle County Airport.iii The Vail resorts are able to create a return on their investment through the resort fees and associated ski packages that they are able to sell to the travelers using the mostly seasonal routes. This is also common at the Telluride and Hayden/Steamboat airports. Minimum Revenue Guarantee Funds Communities seeking to establish a MRG should be cognoscente of several factors in order to successfully utilize this air service marketing incentive. Communities must identify appropriate funding sources, obtain specific pledges to the fund, negotiate a positive air service agreement for the community including MRG and other incentives, and hold the MRG funds in escrow for the length of the air service agreement. Throughout this process, it is essential for prominent officials in the community to maintain and grow community support and education about the incentives, including MRG.
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Appropriate Funding Sources Airports are precluded from contributing airport revenue funds to MRG in order to comply with Federal Grant Assurance No. 25. This grant assurance requires airport revenues be “expended for the capital and operating costs of the airport,” which precludes revenue guarantees.iv However, some state and federal grants may be used including the US Department of Transpiration (DOT) Small community Air Service Development Program (SCASDP). Additionally, local businesses and chambers of commerce who receive the economic benefit from the presence of new air service can, and historically do, contribute to the fund. Small Community Air Service Development Program The Small Community Air Service Development Program (SCASDP) is an excellent source of funding for a revenue guarantee and other financial incentives. This program is available to airports defined by the Federal Aviation Administration (FAA) as small-hub or non-hub airports. FNL qualifies under these criterion and has previously received a grant for the purpose of marketing existing air service through Allegiant and conduct a feasibility study for a program referred to as “Wingless Flight.” A study of the SCASDP grant effectiveness was published in 2014 by the Massachusetts Institute of Technology (MIT) International Center of Air Transportation (ICAT)v. The study examined grant applicants and recipients from 2006-11 and searched for commonalities in recipients who were successful in their goals stated in the grant application. The number of award recipients varies widely depending upon available funds and the average award is less than $500,000. The study found that small-hub airports had an 83% success rate while non-hub airports had a success rate of 24%. While exact conclusions regarding the cause of this disparity were not fully presented in the study a few factors are apparent. Factors include: larger resource pool, larger population base, and larger data set on passenger travel to accurately target potentially successful routes. However, the study did identify multiple commonalities with successful recipients which are also beneficial to FNL. Community Buy-In – Successful retention of community travelers is key to the success of local air service. Small airports have very little draw to take passengers from the catchment area of larger hub airports, therefore small airports must be supported by their community. Airline Support – Airports that had letters of support from an airline prior to their application for the SCASDP were more likely to succeed in their goals. Having such letters of support also increased the likelihood that the grant application would receive an award. For these reasons, the SCASD grand should come after initial marketing efforts to furnish timely results. Significant Local Match – Grant applications that show the Department of Transportation (DOT) a significant local match to the grand funds were awarded more often. A specific example was Bozeman, MT. While the average award is $445,000, Bozeman asked for $1,000,000 with $725,000 local match to provide a range of incentives including an MRG. They were awarded $950,000 and successfully attracted an airline for the proposed seasonal route. Diverse Incentive Strategy – Successful grant recipients used MRG as part of a diverse incentive package. Additional incentives included setup cost reimbursement, reduced or waived airport fees such as landing and facility rental, free parking, and direct multimedia marketing campaigns coordinated with the airline. Each of the above attributes alone will not bring success. Furthermore, none of these attributes produce passengers spontaneously for air travel. Selecting routes that have organic demand and
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4900 Earhart Road Loveland, Colorado 80538 (970) 962-2850 FAX (970) 962-2855 TDD (970) 962-2620 forming a strategy with the above attributes must be done in a holistic approach to air service success. FNL has the demand for air travel necessary to support year round air travel. By unifying the community around a comprehensive incentive strategy, FNL should be successful in attracting reliable air service in a reasonable time period. Obtain Specific Pledges After sources have been identified to fund the planed incentives, the volume of funds needs to be quantified so that information can be shared with airlines during talks. Columbia Mayor Bob McDavid went on record repeating information from his consultant that "$1 million guarantee gets you on a list, $2 million might get you a phone call and a $3 million guarantee could get you a deal."vi In essence, the MRG offered shows the airline the community’s level of commitment to the success of the proposed service. While the funds need not be committed until the Air Service agreement is signed, the sum of all pledges can help overcome an airlines hesitancy to enter a new market. Fortunately the size of the MRG is not the only determining factor and airports have attracted air service with a lower range of MRG. Similar documents or letters of support with pledged contribution amounts may also suffice. Negotiating the Air Service Agreement When negotiating an Air Service Agreement it is important to avoid certain pitfalls in the structure of how the airline qualifies for and receives incentives. The following list of terms may be helpful in protecting the community resources while offering the airline sufficient incentives. Profit Level – What level of profit will be guaranteed to the airline? This can be determined as a percentage and applied to the operational costs of the specified route. The Air Service Agreement (ASA) between Columbia, MO (COU) and American Airlines (AA) found in Appendix 1 includes the specific revenue per flight which they determined using this process. Revenue Reconciliation Process – Clearly outline what the airline must provide to show profit or loss for the time period. Also outline the turnaround time for reconciliation requests. Again the ASA in Appendix 1 further expounds on this matter. Evaluation Period – The period of time which will be evaluated is significant. Too short and more funds will be paid out to the airline unnecessarily. Too long and the airline feels exposed to potential risk. COU and AA determined that information would be given monthly by the end of the subsequent month and funds distributed in a timely manner after the request was received (15 days). Protect Against Contractual Pinch Points – Include definitive actions for a few likely scenarios. For example, if the route quickly develops a revenue excess and no guarantee is needed then later ridership slides low enough to create a revenue shortfall, how does that change the reimbursement? It is reasonable to include that the previous revenue excess be applied to poor months prior to receiving funds from the guarantee. In this way, the revenue guaranteed becomes cumulative from the start date to the time of request in place of isolating months. Continue Open Discussion – Once the agreement is signed, the Airport Director or his representative must maintain dialog with the airline. Once the service is launched it may become apparent to the airline that adjustments to the service would increase profitability and sustainability but be precluded from altering service by the air service agreement. Be available to discuss alternative service and have a contractual way to amend the agreement through
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mutual agreement for the good of the community. See the example below on Jack Brooks Regional Airport. Such open discussion is also important when marketing efforts were included in the incentive package as demonstrated in the Myrtle Beach, SC and WestJet agreement. Funds Held in Escrow – The MRG funds must be available throughout the air service agreement. To ensure funds are available whenever they might be called upon, the best practice is to hold the funds in escrow throughout the term of the agreement. Airlines may require this action as part of the ASA. If possible, escrow funds should be managed in such a way that interest is accrued in the event that funds are not being distributed to the airline. The escrow agreement should also outline which funds are to be obligated first and stipulate to whom the accrued interest belongs. See the below example of Manhattan, KS. The management of the funds may best be done by a local chamber of commerce or other nonprofit group organized for the purpose and composed of private partners with vested interest in the project. It is also reasonable to require the fund manager be part of a donating entity. Community Education Throughout the process of attracting air service, the public will need to learn about the incentives to some extent. In order for the surrounding communities to look favorably on the air service incentives, they must understand their nature and role. Airlines incur a high level of financial risk beginning air service in a new market, especially when the market currently has little or no air service prior to their arrival. Communities offer incentive packages to airlines to help overcome the financial barriers to entry and lower the airline’s level of risk. Conclusion An MRG is essentially an insurance plan for the airline in case their revenue falls short during the start of a new route, then they are compensated. This means that if a route is profitable then no funds of the guarantee are obligated to the airline, if the agreement has the correct structure. At the end of the agreement, remaining funds shall revert to the contributing entity along with any accrued interest. For an airport and the communities it serves, these funds are an investment with potentially high returns in economic activity and stability. Area tourism tends to increase when it is more accessible through affordable air travel. The MRG is an effective tool, especially for airports that have a challenge with attracting and keeping air service. The next section provides case study examples of where MRGs have been used both successfully and in some cases not successfully – and is designed to only be a small cross section of the use of these tools.
Specific Airports Northern Colorado Regional Airport (FNL) Enplanements: 3,000 Enplanements 1 Metro Area Population:
1 Enplanement figures are rounded to nearest thousand except airports with over 1 million enplanements rounded to nearest tenth of a million. The exact figures were obtained through the FAA at http://www.faa.gov/airports/planning_capacity/passenger_allcargo_stats/passenger/?year=all
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552,455 in 2010 census. 2013 estimate increased 2% to 564,578. The metropolitan areas includes Fort Collins, Loveland, and Greeley as well as all of Larimer and Weld Counties. Nearby Airports: Denver International (DEN) – 45 miles S2 - 25.5 million enplanements Cheyenne (CYS) – 49 miles N – 3,650 enplanements Routes: No regular scheduled routes. Only charters. Cheyenne, WY (CYS)3 Enplanements: 3,650 enplanements Airline: American Airlines operated by SkyWest Metro Area Population: 95,531 in 2015 census. The metropolitan area includes Cheyenne, WY. Nearby Airports: Denver International (DEN) – 90 mils SE – 25.5 million enplanements Northern Colorado Regional (FNL) - 50 miles SW – 3,000 enplanements Routes: Once daily to Dallas/Fort Worth (DFW) seasonal increase to twice daily in May to September. SkyWest operates Canadair Regional Jets or CRJ 200s/700s. Revenue Guarantee: $2.1 million revenue guarantee. Other included incentives are unclear as that information has not been made public. SkyWest is estimated by FNL Management that they have received $1.8 million of the pledged guarantee through August of 2019. Outcome: The route was initiated as a result of a $2.146 million minimum revenue guarantee derived from an air service support group called “The Cheyenne Regional Air Focus Team” or "CRAFT”. So far the CRAFT group has paid SkyWest Airlines $1,764,694 for the service for the first ten months of service, November 2018 through August 2019, with an average load of 60%. This cost is an estimated average of $4,490 per outbound flight or $142 per outbound passenger.
2 All airport distances are measured using skyvector.com and represent a direct line from one airport to the next. All distances are displayed in Statute Miles. 3 All data for airports derive from 2015 with the exception of CYS, Cheyenne Regional Airport. Data for CYS was included November 2019.
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Myrtle Beach, SC (MYR) Enplanements: 823,000 enplanements Airline: WestJet Metro Area Population: 269,391 in 2010 census. 2013 estimate increased 2.7% to 276,688. The metropolitan area includes Myrtle Beach, SC, Conway, SC, Leland, NC, North Myrtle Beach, SC and Georgetown, SC. Nearby Airports: Florence Regional (FLO) – 57 mils NW - 60,000 enplanements Wilmington International (ILM) - 71 miles NE - 397,000 enplanements Routes: Twice daily to Toronto (YYZ). WestJet operates Boeing 737’s. Revenue Guarantee: 15% profit up to $1 million for first 6 months. West jet received $510,000 of the pledged guarantee.vii Outcome: An additional part of the service package was to have the local chamber of commerce and an area golf organization provide direct marketing for the flights. The first meeting to coordinate a marketing effort was not held until nearly 4 months after the flights began in May 2014. Area council members attributed this to poor oversight by the Airport Manager who was fired.viii Service continues at the time of this paper (2015).ix Columbia, MO (COU) Enplanements: 46,000 enplanements Airline: American Airlines Metro Area Population: 213,585 in 2010 census. 2013 estimate increased 3.6% to 221,374. The metropolitan area includes Audrain and Randolph Counties. Nearby Airports: St Louis (STL) - 93 miles E - 6.2 million enplanements Kansas City (MCI) – 139 miles W – 4.8 million enplanements
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Routes: Twice daily non-stop to Dallas/Fort Worth and once daily to Chicago O’Hare. All flights with 50 seat regional jet.x Revenue Guarantee: 2 year $3 million revenue guarantee. Also included 2 years of waived landing fees and facility rent charges (valued at $250,000) and $400,000 of broadcast advertising.iv Less than $23,000 has been paid to the airline. Outcome: At the time the deal was announced in Oct 2012, Columbia was served by Delta. With the announcement of this deal, Delta responded by removing service to the market stating that they could no longer operate in Columbia at a competitive disadvantage. Delta had provided service to Atlanta and Memphis.iv Flights for the new routes commenced in February 2013. In the first 22 months of service, only $22,562 of the guarantee had been paid to American for deficiencies during the first two weeks of operation.xi The success is attributed to the lack of available seats from the airport and good route selection to demand driven destinations and large connecting hubs.iv Documents: Air Service Agreement Appendix 1 ASG Amendment Appendix 2 Jack Brooks Regional Airport - Port Arthur, TX (BPT) Enplanements: 36,000 enplanements Airline: American Airlines Metro Area Population: 388,745 in the 2010 Census. 2013 estimate has lowered slightly to 388,430. The metropolitan area includes the cities of Beaumont, Port Arthur, and Orange (also referred to as the Golden Triangle). Nearby Airports: George Bush Intercontinental/Houston (IAH) – 80 miles W – 18.9 million enplanements William Hobby/Houston (HOU) – 78 Miles W - 5.4 million enplanements Routes: 4 flights daily to Dallas/Fort Worth with 50 passenger regional jets.iv Revenue Guarantee: $1.5 Million over two years. The President of the Chamber of Commerce was instrumental in creating an ad hoc non-profit group, Southeast Texas Coalition for Air Service, which collected
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the funds from local municipalities and businesses. They managed and distributed the funds to the airline as needed. See endnote for example city ordinance contributing to the fund. xii Outcome: The route began on Feb 14, 2013 and was not immediately profitable. After 18 months, only $24,000 of the guarantee remained. The deal has worked out because of collaboration between the airport, city, and airline to modify the route to become sustainable. The frequency was lowered to 3 flights daily and the aircraft was changed to include 44 passenger aircraft as well as 50 passenger.xiii The guarantee has since expired but the service remains after 2 years of service as of 2015. Documents: Resolution to grant funds to local Coalition to manage incentive funds: Appendix: 3 Manhattan, KS (MHK) Enplanements: 66,000 enplanements Airline: American Eagle Airlines Metro Area Population: 127,081 in 2010 census. 2013 estimate has increased only slightly to 127,657. The Manhattan Metropolitan area consists of three counties; Geary, Pottawatomie, and Riley. Nearby Airports: Topeka Regional (FOE) – 56 miles E – 9,000 enplanements Salina Regional (SLN) - 57 miles NE – 3,000 enplanements Wichita National (ICT) – 105 miles SE – 736,000 enplanements Routes: Twice daily to Dallas-Fort Worth Revenue Guarantee: $2.5 million over 2 years. Airline received $161,000 of the guarantee. $2 million came from Kansas State. The local funds were expended first and the escrow funds generated interest during the agreement. See source document for details. Outcome: Service began August 2009. The only draw down of the guarantee occurred after the first quarter of operations for $161,000. During the remainder of the air service agreement, American Eagle expanded operations organically in response to demand by adding an additional flight to DFW and another flight to Chicago O’Hare. xiv Documents: Resolution to contribute funds and the conditions thereon: Appendix 4
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Yeager Airport - Charleston, WV (CRW) Enplanements: 251,000 enplanements Airline: PEOPLExpress Metro Area Population: 304,284 in 2010 census. 2013 estimate has decreased slightly to 304,033. The Charleston, WV metropolitan area includes South Charleston, St. Albans, and Dunbar. Nearby Airports: Raleigh County Memorial (BKW) – 47 miles S – 4,000 enplanements Tri-State/Milton J Field (HTS) – 51 miles W – 99,000 enplanements Mid-Ohio Valley Regional (PKB) – 68 miles N – 8,000 enplanements Greenbrier Valley (LWB) – 73 miles SW – 8,000 enplanements Routes: Three flights weekly to Orlando, FL with Boeing 737 (134 seats). Year round route. Revenue Guarantee: $495,000 startup and MRG and $375,000 direct advertising ($400,000 SCASDP grant plus chamber of commerce contributions) Outcome: This route previously existed at the airport with AirTran. The route had the 3rd highest passenger load in 2012 and was eliminated in the merger with Southwest.xv Prior to operations starting, PEOPLExpress suspended operations. Their only aircraft encountered crew shortages and constraints operating with only one plane. The airport had spent $18,000 of the grant prior to operation suspension. The airport is still seeking service for this route. xvi i FAA Air Carrier Incentive Program Guidebook from https://www.faa.gov/airports/airport_compliance/media/air-carrier-incentive-2010.pdf ii FAA Policy and Procedures Concerning the Use of Airport Revenue; Notice from https://www.faa.gov/airports/resources/publications/federal_register_notices/media/obligation_final 99.pdf iii Reported by Allen Best with Mountain Town News obtained from https://mountaintownnews.net/2014/01/19/funding-platform-for-vail-direct-flights/ iv FAA Grant Assurances obtained from http://www.faa.gov/airports/aip/grant_assurances/media/airport-sponsor-assurances-aip.pdf v Study written by Wittman, M. D. and obtained from http://web.mit.edu/wittman/www/ICAT-2014- 01.pdf vi Reported by Zagier, A. S. with the Associated press obtained from http://news.yahoo.com/small- airports-gamble-revenue-guarantees-210911578--finance.html vii Reported through the Horry County website http://www.horrycounty.org/News/TabId/200/BlogPage/3/Category/airport/Default.aspx
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viii Reported by Rodrigues, J. M. with Sun News and obtained from http://skift.com/2013/10/13/how- an-airports-revenue-guarantee-to-an-airline-backfired/ ix Verified at WestJet website; www.westjet.com x Reported by Zagier, A. S. with the Associated press obtained from http://news.yahoo.com/small- airports-gamble-revenue-guarantees-210911578--finance.html xi Reported by Columbia Public Works in a Press Release obtained from http://www.gocolumbiamo.com/Public_Comm/Public_Information/Press_Releases/view.php?id=2928 xii Recorded by Port Aurthur City as Resolution No. 13-121 found at https://cityhall.portarthur.net:444/weblink8/Welcome.aspx?dbid=0 xiii Reported by Wallach, D. with Beaumont Enterprise obtained from http://www.beaumontenterprise.com/news/article/Airline-account-is-about-to-run-dry-5793641.php xiv Information obtained from a Manhattan City Commission Agenda Memo dated 18 December, 2012 http://www.cityofmhk.com/DocumentCenter/Home/View/12494 xv Reported by Steelhammer, R. with Charleston Gazette obtained from http://www.wvgazette.com/article/20140903/GZ01/140909792 xvi Reported by the Register-Herald obtained from http://www.register-herald.com/news/yeager- airport-looks-for-peoplexpress-replacement/article_35b2f46f-ccd6-59e2-a056-70497c062e78.html
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Minimum revenue guarantee lowered for CRA deal with SkyWest Airlines By Margaret Austin, Wyoming Tribune Eagle Nov 19, 2019
CHEYENNE -After a year of increased travel through Cheyenne Regional Airport, the airport's relationship with SkyWest Airlines continues to look positive.
When flights kicked off last year, a minimum revenue guarantee of $2.145 million was required by SkyWest. At the Cheyenne City Council's Finance Committee meeting Monday, Wendy Volk, president of the Cheyenne Regional Air Focus Team, announced the minimum revenue guarantee for this year will be $150,000 less at $1.995 million.
"I think we hit a home run," Volk said.
SkyWest, which oversees the American Airlines service, runs one flight each day to Dallas/Fort Worth International Airport. The air service came to Cheyenne with a minimum revenue guarantee to help mitigate any financial risks for the airline.
Airport Director Tim Barth said the lowered revenue guarantee for this year reflects the success of the Dallas flights.
"I think it's indicative that the service is working," Barth said.
Volk also said the lowered revenue guarantee shows that the business forecast in Cheyenne looks positive for the airline.
"I do think they know what our potential can be if we continue to build our momentum and spread awareness," Volk said.
Last year, the money raised for the revenue guarantee was completely used by August, but SkyWest Airlines continued service at its own expense from August through November. SkyWest saw enough value here that they continued flights.
"It's a give and take," Volk said.
For the initial $2.1 million guarantee, CRAFT went to various stakeholders throughout the state, both public and private, to raise the funds. The funding for the new agreement will come from the city of Cheyenne, Laramie County, the Cheyenne-Laramie County Economic Development Joint Powers Board and the Wyoming Department of Transportation.
WYDOT has already approved $600,000 for the guarantee, the city and county are being asked for $624,000, and the Joint Powers Board will be asked to pay about $143,000. The municipalities were made aware of the costs during their budgeting process, so they had the opportunity to plan for that spending.
According to Volk, CRAFT is building a "long-term strategy" for what the minimum revenue guarantee will look like in the future. The hope is that those payments will continue to decline over the next three to five years.
In the meantime, she said the success of this air service makes Cheyenne more attractive for other airlines that might not require a minimum revenue guarantee.
"It's a process, and I think we're getting a good return on our investment," Volk said.
Neither Volk nor Barth expected the flight to draw so many travelers in its first year. In 2017, just 1,700 passengers flew through Cheyenne Regional Airport. Over the past year, that number jumped to more than 31,000.
In addition to increased traffic, the airport has a new terminal, funded with sixth-penny sales tax revenue, and a gift shop is being opened there this week. Barth also said they hope to have a restaurant open within the next year.
Volk said Cheyenne Regional Airport is the fastest growing small airport in the country, and these flights will continue to benefit the community.
"I truly think this is going to be a way to support more tourism," Volk said.
https://www.wyomingnews.com/news/local_ news/minimum-revenue-guarantee-lowered-for-cra-deal- with-skywest-airlines/article _ aa 1 abd 1 e-9202-5246-a5c2-e 72cc189e0c8.html Cheyenne Airport Loads & Subsidy Estimation Based on Booking Data Departures Departures Roundtrip Roundtrip Load Factor Month Performed Scheduled Seats Enplanements Subsidy Estimate Seats Passengers Difference Nov 55.76% 11 26 27 1,320 736 2640 1472 1168 $ 389,316 Dec 41.20% 12 31 31 2,090 861 4180 1722 2458 Jan 56.37% 1 31 31 1,570 885 $ 146,590 3140 1770 1370 Feb 59.79% 2 28 28 1,450 867 $ 124,762 2900 1734 1166 Mar 75.00% 3 28 31 1,420 1,065 $ 75,970 2840 2130 710 Apr 66.67% 4 27 30 1,419 946 $ 101,222 2838 1892 946 May 60.00% 5 54 59 2,780 1,668 $ 237,968 5560 3336 2224 Jun 62.19% 6 51 60 2,650 1,648 $ 214,428 5300 3296 2004 Jul 64.66% 7 58 61 2,980 1,927 $ 225,342 5960 3854 2106 Aug 58.77% 8 59 61 2,995 1,831 $ 249,096 5990 3662 2328 Total 60.04% 393 419 20,674 12,434 $ 1,764,694 41,348 24,868 16,480 *Subsidy was published for November and December in the Wyoming Business Journal - and the information was used to create a formula estimate for other months (~$214 per empty outbound seat). This data does not take into consideration paying vs. unpaid passengers. Roundtrip data was estimated using outbound only travel bookings or enplanements.
NORTHERN COLORADO PASSENGER REGIONAL AIRPORT DEMAND ANALYSIS
YEAR ENDED MARCH 31, 2018
TABLE OF CONTENTS
Section 1. Introduction ...... 3 Section 5. True Market Estimate ...... 18 Section 2. Executive Summary ...... 3 Methodology ...... 18 Section 3. Industry Trends ...... 5 Airport Catchment Area ...... 19 Domestic Versus International ...... 20 Frequency and Capacity Changes ...... 6 True Market Passengers By Community ...... 20 Airline Profitability ...... 7 Top 25 Domestic Destinations ...... 21 Bankruptcies, Mergers and Acquisitions ...... 8 Top 15 International Destinations ...... 22 Fleet Changes ...... 9 Federal Aviation Administration (FAA) Geographic Regions ..... 23 Fluctuating Price of Fuel ...... 10 Regional Distribution of Travelers ...... 24 Pilot Shortage ...... 11 Distribution of International Travel ...... 24 Low-Cost Carrier Competition ...... 12 Airlines Used at DEN ...... 25
Section 4. Historical Air Service ...... 13 Section 6. Opportunity Analysis ...... 26 Historical Scheduled Air Service ...... 13 Major Network Airlines ...... 26 IRPORT Seasonality ...... 14 A Ultra Low-Cost Airlines ...... 34 Revenue and Fare Trends ...... 15 Other Airlines ...... 38 Load Factor ...... 15
EGIONAL EGIONAL RASM Performance ...... 16 Appendix A. Top 50 True Markets ...... 39 R Appendix B. Glossary ...... 41 OLORADO C
ORTHERN N
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SECTION 1. INTRODUCTION
he constantly changing air transportation needs of Tcommunities and the dynamics of the airline industry create an on-going challenge for small and mid-sized communities in the United States. Today, communities are faced with intense competition for air service as the industry continues to maintain capacity discipline. Following September 11, 2001, airlines, struggling to remain in business, reduced capacity nationwide
and focused on the performance of the high density markets. Small and mid-sized communities experienced dramatic reductions in service; while, at the same time, airlines began phasing lower IRPORT A capacity aircraft out of their fleets. Now, these challenges have been further compounded by industry consolidation and rising fuel prices, making service reinstatement in markets like Fort Collins even more challenging. EGIONAL EGIONAL R This Passenger Demand Analysis report is an effort to understand and evaluate Northern Colorado Regional Airport’s (FNL) air service market, to facilitate actions for reinstatement of commercial air OLORADO
C service. To that end, this report provides objective, comparative data compiled from industry sources on the FNL air service market. It reviews historical performance of FNL’s previous commercial air service and provides an estimate of the total market demand today. This outlook is ORTHERN
N useful in assuring that long lead-time airport infrastructure needs are attuned to air service and
– market demand needs. Airlines take many factors into consideration when making capacity and route decisions, and it is the intent of this report to provide insight into several of those
NALYSIS market considerations. This report reviews scheduled commercial air service potential and does not A include information on general aviation activity. Finally, the report provides support for passenger enplanement and peak hour forecasts in the Airport Master Plan. EMAND D ASSENGER ASSENGER P
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SECTION 2. EXECUTIVE SUMMARY
SOURCE DATA HISTORICAL SCHEDULED AIR SERVICE TRUE MARKET ESTIMATE From 2003 to 2012, Allegiant Air provided The FNL catchment area has an estimated Data used in the Passenger Demand Analysis scheduled commercial air service to FNL. 2018 population of 685,693 in 32 zip codes. is sourced from Diio Mi (origin and destination Service was provided on a less-than-daily basis The catchment area contains the population of and schedule data) and Airline Reporting to Las Vegas during that time period. Allegiant travelers who should use FNL considering the Corporation (ARC) ticketed data for the year- also provided service to Phoenix-Mesa from drive time from the catchment area to ended March 31, 2018. The true market 2010 to 2012. After two years of no scheduled competing airports. estimate includes 58,554 ARC tickets from the service, Elite Airways entered the market with FNL catchment area. service to Chicago Rockford International FNL’s true market is estimated at 2,333,783
Airport. Elite provided service from 2015 annual origin and destination passengers.
INDUSTRY TRENDS to 2016. Domestic travelers accounted for 93 percent of the total true market. International travelers Industry trends that have impacted or will IRPORT The load factor on Allegiant’s service to Las made up the remaining 7 percent of A impact reinstatement of FNL commercial air Vegas improved over time, exceeding 90 passengers. All FNL catchment area travelers service include airline frequency and capacity percent on an annual basis for the first time in used Denver International Airport (DEN).
EGIONAL EGIONAL changes; airline profitability; bankruptcies,
R 2008. Loads continued to be strong through mergers and acquisitions; fleet changes; the 2012. The Phoenix-Mesa service had strong Fifty-eight percent of travelers, or 1,269,963 fluctuating price of fuel; the pilot shortage; and load factor performance, averaging 92 to 93 passengers, were destined to or from one of the low-cost carrier competition. Trends that are OLORADO percent. Elite Airways’ available data is limited. top 25 markets. Phoenix-Sky Harbor was the C beneficial to FNL’s efforts include airline The load factor data that is available shows low number one destination. The next largest profitability being at an all-time high and low- loads for the service in 2016, averaging markets were Los Angeles, Seattle, San cost carrier competition. However, trends such
ORTHERN 57 percent. Francisco and Las Vegas, with each of the top
N as the pilot shortage and the increasing cost of
– five markets having more than 100 passengers fuel may be a barrier to FNL’s air service On a revenue per available seat mile (RASM) daily each way (PDEW). Cancun, Mexico, development efforts. basis, the FNL service performed well for London-Heathrow, UK, and Puerto Vallarta,
NALYSIS A Allegiant for the year ended June 30, 2012, Mexico, made up the top three international having improved in both markets year-over- destinations.
EMAND year. RASM information is not available for the D Elite service. ASSENGER ASSENGER P
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Twenty-seven percent of travelers were OPPORTUNITY ANALYSIS – OPPORTUNITY ANALYSIS – destined to the West region, followed by the MAJOR NETWORK AIRLINES ULTRA-LOW-COST AIRLINES Southeast region with 15 percent. The Great Lakes region, East region and Southwest region With DEN less than a one-hour drive from FNL, The biggest opportunity for FNL is with the low- had 13, 11 and 11 percent shares, respectively, traditional major network airlines such as cost and ultra-low cost carriers. Allegiant of the total true market. Of the international American, Delta, United or Southwest, are previously served FNL, and by all indicators travelers, the top three international regions unlikely to serve the market in the near term. was successful in the market. With the close were Mexico and Central America, Europe, Looking longer term, American may be a proximity to a large potential market, both from and Asia. possibility. American is re-instating service at the FNL catchment area and the nearby Denver Cheyenne Regional Airport with a large area, it is reasonable that Allegiant could
minimum revenue guarantee. With this type of operate service to its traditional destination The airline share of passengers using DEN was incentive, the airline is guaranteed it will markets like Las Vegas, Phoenix-Mesa or estimated using an approximation of carrier generate a specified amount of revenue from Orlando-Sanford, and its less traditional large share with ARC data. Carrier shares were: ticket sales associated with the new service. If markets like Cincinnati or Austin. Other low- United Airlines 37 percent, Southwest Airlines the airline does not meet the target revenue, the cost-carriers have a presence at DEN. It is 24 percent, American Airlines 13 percent, Delta local entity providing the guarantee makes a unknown if they would be willing to operate from Air Lines 10 percent, Frontier Airlines 8 percent
cash payment to the airline for the shortfall. both markets. and Alaska Airlines 3 percent. All other carriers combined for the remaining 5 percent
IRPORT If American is able to overcome the proximity to A of passengers. DEN at Cheyenne, it could open up an opportunity for FNL service in the future. Similar
EGIONAL EGIONAL to Cheyenne, airline risk abatement (i.e., R minimum revenue guarantee) would likely be needed.
OLORADO C ORTHERN N
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SECTION 3. INDUSTRY TRENDS
his section reviews commercial air service industry trends that have Timpacted or will impact reinstatement of air service at FNL. For example, recent airline profitability is a strength that could provide opportunities for FNL whereas the pilot shortage is a weakness and may threaten FNL’s ability to obtain air service.
The following industry trends are reviewed
IRPORT in this section: A Frequency and capacity changes Airline profitability
EGIONAL EGIONAL Bankruptcies, mergers and acquisitions R Fleet changes Fluctuating price of fuel
OLORADO Pilot shortage C Low-cost carrier competition
ORTHERN Specific airline-by-airline trends are discussed in Section 6. N
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Declining Flights at FREQUENCY AND CAPACITY CHANGES Non-Hub Airports While flights at Over the past decade many airports experienced EXHIBIT 3.1 US DOMESTIC FLIGHT CHANGE BY AIRPORT SIZE medium hub and large capacity reductions as carriers merged, mainline (CY 2018 VS. CY 2013) hub airports have 5.9% increased, flights at hubs/fleets were realigned, regional jets replaced mainline flying in the US and carriers shifted non-hub and small hub 6% airports decreased, resources to international markets. A total of 69 2.0% with flights at non-hub 4% US airports with air service in 2008 do not have 0.9% airports decreasing 9.2 2% percent over the past scheduled service in 2018 (source: Diio Mi). five years. 0% Much of the negative change in flights in the last (0.5%) five years was experienced by non-hub airports (2%) as shown in Exhibit 3.1. (4%)
(6%) Conversely, seats have increased across all (8%) airport categories, with non-hub airports (9.2%) increasing 5.6 percent, small hub by 18.0 (10%) % change in flights
percent, medium hub by 23.4 percent and large Non-hub Small hub Medium hub Large hub Total
hub by 15.5 percent. While small to large hubs Source: Diio Mi Scheduled Flights by Calendar Year; as of 9/26/18 IRPORT Note: Non-hub includes primary and non-primary
A increased by double digits, seats at non-hub airports increased at a much slower pace. Most TABLE 3.1 SCHEDULED FLIGHTS AND SEATS COMPARISON BY AIRLINE of this growth resurgence has happened in just JUL 2018 VS JUL 2013 EGIONAL EGIONAL
R the last two years. CARRIER FLIGHTS SEATS American Airlines (3.7%) 6.0% Delta Air Lines (1.3%) 12.4% Table 3.1 provides an overview by top domestic United Airlines (8.9%) 14.4% OLORADO airlines of total scheduled flights and seats over
C Southwest Airlines 3.0% 10.8% the past five years. Overall domestic flights have Alaska Airlines 28.7% 36.3% increased 0.8 percent. The top three airlines JetBlue Airways 20.4% 25.5% Spirit Airlines 123.4% 153.2%
ORTHERN decreased flights as they shifted to larger
N Frontier Airlines 44.5% 92.2%
– aircraft. At the same time, domestic seats Allegiant Air 115.0% 108.6% increased 16.6 percent. Growth differs greatly Hawaiian Airlines 22.6% 21.0% from airline to airline with all airlines increasing Sun Country Airlines 22.9% 39.7% NALYSIS NALYSIS Total All Domestic 0.8% 16.6% A seats since 2013. Source: Diio Mi Schedule (July 2018 versus July 2013) as of 8/14/18; Ranked by July 2018 flights; Note: Historical data includes merged airlines
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AIRLINE PROFITABILITY
For many years traditional network carriers struggled to survive. Since 1990, multiple airlines have entered and exited bankruptcy (discussed in the following subsection). However, in recent years, airlines are thriving as shown in Exhibit 3.2, which shows the US airline industry net income from 1990 through 2017.
EXHIBIT 3.2 US AIRLINE INDUSTRY NET INCOME
$50 $40 $30 $20 $10 $0 ($10) ($20)
($30) ($40) IRPORT Airline net income (Billions) income net Airline A ($50) EGIONAL EGIONAL
R Cumulative profit since 1990 Source: Diio Mi, Form 41 Net Income (All Airlines, Total System)
OLORADO Until recently, airlines have not sustained strong profitability. From 2001 through 2005, the combination of depressed air travel C demand and higher costs produced financial losses which were more severe and sustained over a longer period of time than previous downturns. The industry rebounded in 2006/2007 only to suffer significant losses in 2008/2009 with the increased
ORTHERN cost of fuel and the economic recession. Since 2010, the airlines have consistently been profitable, finally overcoming previous N
– losses and achieving a cumulative net profit in 2015 for the first time since 2001. From 2010 to 2017, the airlines had a combined net income of approximately $85 billion. Profit drivers have included consolidation, capacity restraint, increased ancillary revenue (e.g., bag fees) and a reduction in fuel cost. NALYSIS
A
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BANKRUPTCIES, MERGERS AND ACQUISITIONS
Since the airline industry deregulation in 1978, many airlines have come and gone as the industry and economy evolved. The economic woes of the 2000 through 2005 period pushed many airlines to the brink of financial distress. In spite of layoffs, wage and benefits cuts, the pruning of amenities, and emphasis of cost savings through automation, many airlines moved into the protection of bankruptcy reorganization. A number of airlines ceased operations during this time period or merged with other airlines. Examples within the last 10 years of service cessation include Peoples Express in 2015 Colgan Air in 2012, Air Midwest in 2008, Skybus Airlines in 2008 and Big Sky Airlines in 2008. Chapter 11 bankruptcy filings included PenAir (2017), Pinnacle Airlines (2012), American Airlines (2011), Gulfstream International Airlines (2010), and Mesa Airlines (2010) to name a few. More recently, airline consolidation (i.e., mergers) has led to just five major airlines (American Airlines, Delta Air Lines, United Airlines, Southwest Airlines and Alaska Airlines). These five major airlines control approximately 86 percent of domestic capacity. Exhibit 3.3 provides a depiction of the impact of consolidation.
EXHIBIT 3.3 MERGERS AND ACQUISITIONS
IRPORT A EGIONAL EGIONAL R OLORADO C
ORTHERN N
There has been very little in the way of new entrant carriers in the past five years, leaving fewer options for communities – negatively impacted by industry changes. The continued consolidation of domestic airlines (such as the recent Alaska Airlines/Virgin America merger) can be a threat to FNL’s ability to add air service, but as carriers like Alaska and United
NALYSIS NALYSIS compete more aggressively for regional presence, FNL could see some opportunities emerge. A
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FLEET CHANGES
EXHIBIT 3.4 PERCENTAGE CHANGE IN DEPARTURES BY AIRCRAFT SIZE Fleet changes at the major and regional airlines 60% 57% have impacted airports significantly and will 49% 50% continue to have a major impact in the years ahead as older, smaller aircraft are phased out. 40% The composition of regional airline fleets have 30% changed dramatically since the mid-1990s. There 20% 10% has been a marked decline in regional airline 1% turboprop and smaller regional jet fleets. They 0% ≤ 50 51-100 101-150 >150 Total have been replaced by larger regional jets and (10%)
70-plus seat Bombardier Q400 turboprops. As (20%) (15%) smaller aircraft have been rapidly retired from (30%) airline fleets, there are currently no new (40%) (40%) replacements being manufactured. As a result, (50%) smaller communities with limited passenger Aircraft Size by Seat Category demand are running out of traditional air service options. Source: Diio Mi US Domestic Schedule Departures and Seats for Calendar Years Shown; As of 8/14/18 IRPORT
A The regional jet evolution started initially with 37- to 50-seat jets. They were used to connect smaller markets to more distant hubs, hubs that were not previously accessible with turboprop aircraft. Approximately 1,500 small regional jets were delivered EGIONAL EGIONAL
R to US carriers, with most deliveries occurring by 2006. There have been no orders for 50-seat regional jets in nearly a decade.
In the early 2000s, the 70-seat regional jet with first class seating was born. These larger regional jets are similar to the larger,
OLORADO mainline aircraft product with further range and better performance. Many of the 50-seat regional jets are being replaced with C larger regional jets. This transition to larger aircraft often results in fewer departures to offset the additional seats in the market.
ORTHERN Exhibit 3.4 provides the change in departures by aircraft seat category over the past five years. Aircraft with 50 seats or less N
– have declined the most, with a decrease of 40 percent, followed by aircraft with 101 to 150 seats at a 15 percent decline. The use of 51 to 100 seat aircraft and greater than 150 seats have increased significantly.
NALYSIS NALYSIS
A
EMAND D
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Fuel Prices FLUCTUATING PRICE OF FUEL Adverse Effect The cost of fuel has The cost of fuel historically has been the single largest source of the airline industry’s inability to sustain ongoing profitable been the single largest operations. Increases in fuel cost adversely affect airlines in two ways: source of the airline industry’s inability to Absolute increases in overall expenses sustain ongoing Reduced demand as higher gas prices mean less discretionary income for air travel profitable operations. When fuel prices are high, airlines reduce flying, raise airfares and retire fuel inefficient aircraft. A 25 percent increase represents roughly $6 billion in added operating expenses. The opposite reaction also occurs when fuel prices drop. Declines in fuel cost increase profits and put pressure on the airlines to reduce average fares.
Exhibit 3.5 shows the fluctuating price of fuel since 2009. Fuel prices dropped by 43 percent on average in 2015 over 2014 driving record profitability. Calendar year 2016 prices were down 18 percent over 2015; however, 2017 prices increased 25 percent over 2016 (still down 42 percent over 2014). Recently, fuel prices for the first six months of 2018 were up 37 percent over the first six months of 2017 which could lead airlines to consider pulling back on growth.
EXHIBIT 3.5 FLUCTUATING PRICE OF FUEL $3.5 IRPORT A $3.0
EGIONAL EGIONAL $2.5 R
$2.0 OLORADO
C $1.5 Jet A Gallon Per Jet A
$1.0 ORTHERN N
– $0.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
NALYSIS NALYSIS Source: US Energy Administration for Gulf Coast Jet Fuel Spot Price Per Gallon through June 2018 A EMAND D ASSENGER ASSENGER P
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PILOT SHORTAGE
Regulatory requirements have led to pilot shortages that continue to have a very negative impact on small airports across the nation. The regulatory changes were brought about by a Colgan Air accident in February 2009. Public and government outcry over pilot training and crew rest led to changes in the rules that affect pilot availability. The most significant change was the requirement that all pilots for Part 121 carriers be Airline Transport Pilot (ATP) rated, which requires 1,500 hours of flight time. In the past a first officer could have as few as 250 hours with a Commercial Certificate. Limited options exist today for getting from 250 hours to 1,500 hours. There are significantly fewer military pilots entering the workforce as the military is training fewer pilots annually. Civilian (private) flight training is drastically more expensive than pre 9/11, and costs are harder to justify for trainees. It can cost up to $100,000 for training up to Certified Flight Instructor. Many instructors make less than $20,000 per year upon graduation and need to instruct for several years to get to 1,500 hours total.
Other changes included longer minimum crew rest, an increase from eight hours IRPORT
A to 10 hours. While the pilot shortage of the mid-2000s was abated due to the mandatory retirement age for pilots increasing from 60 to 65 years old, the benefit of that change ended a few years ago. In fact, pilot retirements will accelerate over EGIONAL EGIONAL
R the next five years as pilots hired during the 1980s hiring boom start to retire. The result of these changes on regional airlines is significant, and hiring pressure has been reported by the airlines. While mainline airlines continue to recruit from regionals, the regional airlines are having difficulty keeping up with pilot recruitment and retention. They are essentially a pipeline for the
OLORADO mainline airlines. Several regional airlines have shrunk or announced closure due to pilot concerns. In addition, the pilot C shortage has sped the retirements of 50-seat regional jets and growth in smaller mainline aircraft. This is a direct threat to regional air service.
ORTHERN N
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LOW-COST CARRIER COMPETITION
Low-cost carriers (LCCs) have been a part of the industry fabric for 40-plus years, most successfully illustrated by Southwest Airlines’ growth into what has become the largest domestic airline, both in terms of flights and passengers carried. As part of the natural marketplace, major network carriers like American Airlines, Delta Air Lines and United Airlines have learned to compete successfully with them. The major change in the competitive dynamic in most recent years has been the evolution and growth of the ultra-low- cost carriers (ULCCs) like Spirit Airlines, Frontier Airlines and Allegiant Air who have taken average fares to new lows and have forced the established carriers to rethink the way they compete.
Table 3.2 shows the average domestic fares by airline for the year ended TABLE 3.2 AVERAGE DOMESTIC FARE BY AIRLINE March 31, 2018, broken down by non-ULCCs and ULCCs. While the traditional YE 1Q 2018 LCCs like Southwest and JetBlue generate fares that are 20 percent to 35 ONE-WAY AIRLINE AVERAGE AIRFARE percent less than the average for network carriers, the ULCCs like Allegiant, Non-ULCC Airlines Frontier and Spirit averaged fares that are 70 percent to 80 percent lower than United $214 the traditional airlines. This is a very different pricing dynamic than the network Delta $207
carriers have traditionally competed against. Even traditional LCCs like American $205 Alaska $169 Southwest find themselves with pricing competition that has become a major JetBlue $153 IRPORT
A challenge. It is important to note, however, that for the ULCCs, especially Spirit Southwest $132 and Allegiant, that a very large percentage of their revenue is generated from Avg Non-ULCC $182 ancillary revenues, which are not included in average passenger fares. ULCC Airlines
EGIONAL EGIONAL Allegiant $68
R Frontier $60 In addition to the steep discounted pricing, the traditional carriers are seeing Spirit $50 more and more of their networks affected by this new pricing dynamic. Just five Avg ULCC $58 Avg U.S. $170 OLORADO years ago, only 15 percent of US domestic passengers had a ULCC option in
C Source: Diio Mi YE 1Q 2018 US airfares ranked by their market. Today, just five years later, that percentage has more than YE 1Q 2018; Note: Alaska includes Virgin America doubled. Network airlines are having to adapt rapidly to this new intensity of
ORTHERN competition. American, Delta and United have come out with a form of basic economy fares to price themselves more N
– competitively in markets where they overlap with these carriers. Many of these programs now have tiered pricing options where consumers can pay the lowest price by giving up amenities that typically accompany normal fares, like seat selection, baggage check, carry-ons, priority boarding, meals, etc. The evolution of price competition is accelerating as the ULCCs grow NALYSIS
A at a pace much faster than the rest of the industry, and airlines are experimenting and adapting rapidly.
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SECTION 4. HISTORICAL AIR SERVICE
his section reviews historical air service at FNL, with a review of scheduled airline service and seasonality. This section also reviews FNL’s service performance compared to other Tmarkets that the airline served at the time.
HISTORICAL SCHEDULED AIR SERVICE
In 2003, Allegiant Air began serving FNL. Allegiant ceased service in 2012. From 2015 to 2016, Elite Airways provided service. To depict the fluctuation in air service, Exhibit 4.1 provides the total available seats and flights since 2003 on a year-ended basis. Scheduled available seats peaked for the year ended March, 31, 2012, with 46,350 annual seats and 309 annual flights.
The lowest service level occurred from the first quarter of 2013 through the second quarter of 2015 when the airport had no scheduled commercial airline service Elite’s service provided far fewer seats and flights than the previous Allegiant service.
IRPORT
A EXHIBIT 4.1 HISTORICAL SCHEDULED OUTBOUND AIRLINE SEATS/FLIGHTS 50,000 500 45,000 450 EGIONAL EGIONAL
R 40,000 400 35,000 350 30,000 300 OLORADO
C 25,000 250
20,000 200 Flights 15,000 150 Available Seats Available
ORTHERN 10,000 100 N
Seats Flights
– 5,000 50 0 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 NALYSIS
A 20032004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 12 Months Ended
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Table 4.1 provides historical air service by airline and destination for calendar years 2004 through 2016. From 2003 through 2012, Allegiant provided service to Las Vegas. Allegiant also provided service to Phoenix-Mesa from 2010 to 2012. From 2015 through 2016, Elite Airways provided service to Rockford, IL, located approximately 85 miles from the Chicago Metro area.
TABLE 4.1 FNL HISTORICAL SCHEDULED AIRLINE SERVICE FLIGHTS BY CALENDAR YEAR DESTINATION AIRLINE 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Las Vegas, NV Allegiant 257 285 284 223 218 227 217 201 153 Phoenix, AZ (AZA) Allegiant 24 98 74 Rockford, IL Elite Airways 64 44 Total Flights 257 285 284 223 218 227 241 299 227 0 0 64 44 Total Seats 38,550 43,074 42,762 33,612 33,834 34,536 36,312 44,850 34,050 0 0 3,008 2,068 Source: Diio Mi scheduled departures/seats
SEASONALITY
Exhibit 4.2 shows the average number of available seats provided by month from 2009 through 2011 for the FNL-Las Vegas service. The number of available seats fluctuated significantly by month, peaking in March and hitting 12-month lows in February and August.
IRPORT EXHIBIT 4.2 SEASONALITY OF SCHEDULED SEATS A 3,300
3,100 EGIONAL EGIONAL R 2,900
2,700 OLORADO
C 2,500
Available Seats Available 2,300
ORTHERN 2,100 N
– 1,900 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
NALYSIS Calendar Month - 3-Year Average A Source: Diio Mi scheduled seats for FNL-Las Vegas service, January 2009 through December 2011
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EXHIBIT 4.3 REVENUE AND FARE TRENDS REVENUE AND FARE TRENDS $350 $7 Exhibit 4.3 shows the FNL revenue and fare trend $300 $6 from calendar year 2004 through 2016 compared to the national average. With Allegiant’s low-fare $250 $5 service in the market from 2004 through 2012, FNL’s $200 $4 average fare was significantly lower than the US average. While FNL’s fare increased with the Elite $150 $3
Airways service, the average remained far below the $100 $2 national average. FNL’s origin and destination FNL O&D Revenue ($M) Fare/US O&D Revenue ($B) Revenue Fare/US O&D $50 $1 revenue fluctuated significantly with the changing levels of air service. Comparatively, the US origin $0 $0 and destination revenue continued to increase throughout the 13-year period, with the exception of FNL Fare US Average Fare US O&D Revenue ($B) FNL O&D Revenue ($M) LOAD FACTOR Source: Diio Mi
Table 4.2 provides FNL’s average load factor by market and airline from calendar year 2004 to 2016. For the first several IRPORT
A years of service, load factors for Las Vegas averaged less than 80 percent. Loads began to increase in 2007 and exceeded 90 percent for the first time in 2008. Loads continued to be strong until service ended in 2012. At Phoenix-Mesa, load factors exceeded 90 percent on average in all three years of service, indicating strong passenger performance. There is limited data EGIONAL EGIONAL
R available for the Elite Airways service due to limited reporting requirements; information that is available indicates a low load factor which likely contributed to the cancellation of service.
OLORADO
C TABLE 4.2 FNL AVERAGE LOAD FACTOR LOAD FACTOR BY CALENDAR YEAR DESTINATION AIRLINE 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Las Vegas, NV Allegiant 75 79 78 82 91 88 91 93 88 ORTHERN Phoenix, AZ (AZA) Allegiant 92 93 93 N
– Rockford, IL Elite Airways 57 Average Load Factor 75 79 78 82 91 88 91 93 90 0 0 0 57 Source: Diio Mi
NALYSIS NALYSIS A EMAND D ASSENGER ASSENGER P
PAGE 16
FNL Las Vegas RASM PERFORMANCE Service Performed Average RASM is the unit revenue (i.e. revenue divided by available seat miles) generated and is a key indicator to understanding and FNL’s Las Vegas comparing performance of multiple stations/markets. RASM comparisons for FNL are provided for the Allegiant service. Data service performed at is not available for the Elite Airways service. The charts plot the RASM by market against the stage length of the service. A Allegiant’s RASM average and the load trend line is provided to show the average RASM for the stage lengths selected. A market above the trend line is considered to factor was slightly be performing above average and a market below the trend line is generally considered to be performing below average. above average. Allegiant provided service at FNL on a less than daily basis to Las Vegas, generally with four weekly roundtrips. Exhibit 4.4 shows the RASM for markets served by Allegiant to Las Vegas plotted against the stage length (under 1,200 miles) for the last full year of service, year ended June 30, 2012. FNL’s RASM of 9.6 cents at a stage length of 628 miles was at Allegiant’s market average. Compared to year ended June 30, 2011, FNL’s RASM improved 5 percent. FNL’s Las Vegas load factor of 90 percent was slightly above Allegiant’s Las Vegas average of 89 percent but declined year-over-year by 3 percentage points. Based on the information available, cancellation of FNL’s Las Vegas service was not directly related to performance issues.
EXHIBIT 4.4 ALLEGIANT AIR LAS VEGAS (LAS) RASM PERFORMANCE – YE JUNE 30, 2012
16
IRPORT 15 A 14
13 EGIONAL EGIONAL R 12
11 OLORADO
C 10 RASM (cents) 9 FNL
ORTHERN 8 N
– 7
6 NALYSIS NALYSIS 200 300 400 500 600 700 800 900 1,000 1,100 1,200 A Stage length (0-1,200 miles)
EMAND Source: Diio Mi D
ASSENGER ASSENGER P
PAGE 17
Allegiant also provided service at FNL on a less than daily basis to Phoenix-Mesa, generally with two weekly roundtrips. Exhibit 4.5 shows the RASM for markets served by Allegiant to Phoenix-Mesa plotted against the stage length (under 1,200 miles) for the last full year of service, year ended June 30, 2012. FNL’s RASM of 8.6 cents at a stage length of 614 miles was at Allegiant’s market average. Compared to year ended June 30, 2011, FNL’s RASM improved 5 percent. FNL’s Phoenix-Mesa load factor of 93 percent was slightly above Allegiant’s Las Vegas average of 92 percent and remained steady year-over-year. Based on the information available, similar to Las Vegas, Allegiant’s cancellation of FNL’s Phoenix-Mesa service was not directly related to performance issues.
EXHIBIT 4.5 ALLEGIANT AIR PHOENIX-MESA (AZA) RASM PERFORMANCE – YE JUNE 30, 2012
11
10 IRPORT A 9 FNL EGIONAL EGIONAL
R 8 RASM (cents) 7 OLORADO C
6 ORTHERN N
– 5 200 300 400 500 600 700 800 900 1,000 1,100 1,200 Stage length (0-1,200 miles)
NALYSIS A Source: Diio Mi
EMAND D ASSENGER ASSENGER P
PAGE 18
SECTION 5. TRUE MARKET ESTIMATE
he true market portion of the Passenger Demand Analysis Tprovides the total number of passengers in the catchment area. This section investigates destinations associated with travel to and from the catchment area. In addition, destinations are grouped into geographic regions to further understand the regional flows of catchment area air travelers.
METHODOLOGY
IRPORT The Passenger Demand Analysis combines ARC ticketed data and U.S. Department of A Transportation (DOT) airline data to provide a comprehensive overview of the air travel market. For the purposes of this study, ARC data includes tickets purchased through travel agencies in the FNL
EGIONAL EGIONAL catchment area as well as tickets purchased via online travel agencies by passengers in the FNL R catchment area. It does not capture tickets issued directly by airline Web sites (e.g., www.delta.com, www.united.com) or through airline reservation offices. The data used include
OLORADO tickets for the zip codes in the catchment area, NOT all tickets. As a result, ARC data represents a C sample to measure the air travel habits of catchment area air travelers.
Data for travel agencies located within the catchment area is reported by the zip code of the travel ORTHERN N agency. Online travel agency data (e.g. Expedia, Orbitz and Travelocity) is reported by the – customer zip code used to purchase the ticket. Although limitations exist, ARC data accurately portrays the airline ticket purchasing habits of a large cross-section of catchment area travelers, NALYSIS
A making the data useful to both airports and airlines. A total of 58,554 ARC tickets for the year ended March 31, 2018, were used in this analysis. Adjustments were made to account for
EMAND Southwest Airlines and Frontier Airlines since they have limited representation in ARC. D ASSENGER ASSENGER P
PAGE 19
With no existing scheduled commercial air service, to estimate TABLE 5.1 TRAVEL FACTOR ESTIMATE TRUE TRAVEL the total number of air travelers generated by the FNL AIRPORT POPULATION MARKET FACTOR catchment area, a population travel factor is used. The travel Billings, MT 898,306 238,939 3.76 factor is an estimate of the number of air trips per year per Pullman, WA 288,184 77,769 3.71 Flagstaff, AZ 656,534 178,645 3.68 capita. An array of travel factors for cities that are similar to the Bismarck, ND 547,976 154,260 3.55 Fort Collins-Loveland area are included in Table 5.1. Grand Junction, CO 561,198 220,000 2.55 Total 2,952,198 869,613 3.39 DEN catchment area origin and destination passengers include Source: Mead & Hunt Estimates large numbers of winter and summer vacationers destined for the Rocky Mountains. FNL origin and destination passengers will include many vacationers due to the proximity of Rocky Mountain National Park, but the airport will not be a gateway to the ski areas due to geographic topography and highway limitations. Use of DEN’s travel factor would risk overstating the FNL catchment area’s market size. All of the communities in Table 5.1 have varying degrees of vacation/tourist traffic. For purposes of this analysis, a travel factor of 3.39 is used to estimate passenger traffic in the FNL catchment area.
AIRPORT CATCHMENT AREA EXHIBIT 5.1 FNL CATCHMENT AREA
An airport catchment area, or service area, IRPORT
A is a geographic area surrounding an airport where it can reasonably expect to draw passenger traffic and is representative of EGIONAL EGIONAL
R the local market. The catchment area contains the population of travelers who should use FNL considering the drive time OLORADO
C from the catchment area to competing airports. This population of travelers is FNL’s focus market for air service
ORTHERN improvements and represents the majority N
– of travelers using the local airport. Exhibit 5.1 identifies the FNL catchment area. It is
NALYSIS NALYSIS comprised of 32 zip codes within the U.S. A with an estimated population of 685,693 (source: U.S. Census Bureau, Woods & EMAND
D Poole Economics, Inc.). ASSENGER ASSENGER P
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DOMESTIC VERSUS INTERNATIONAL
EXHIBIT 5.2 AIRPORT USE Exhibit 5.2 shows the split between domestic and international International itineraries. An estimated 93 percent of passengers fly domestically. 7% The remaining 7 percent of passengers fly to international destinations.
TRUE MARKET PASSENGERS BY COMMUNITY
Table 5.2 shows the breakdown of the total true market passengers by community based on ARC data. ARC includes local travel agency Domestic data (reported by travel agency zip code) and online travel agency 93% data (reported by the passenger zip code).
The Fort Collins community had the largest share of passengers at TABLE 5.2 TRUE MARKET PASSENGERS BY 35 percent followed by Longmont at 22 percent and Loveland at 13 COMMUNITY percent. The only other community with a share 10 percent or TRUE % OF COMMUNITY MARKET TOTAL greater was the Greeley community. Fort Collins 810,829 35 IRPORT
A Longmont 522,799 22 Loveland 293,182 13 Greeley 226,063 10
EGIONAL EGIONAL Windsor 138,483 6
R Johnstown 56,307 2 Berthoud 50,407 2 Estes Park 41,125 2 Lyons 27,108 1 OLORADO
C Timnath 26,239 1 Eaton 26,239 1 Evans 24,394 1 Mead 21,431 1 ORTHERN N
Milliken 13,477 1 – Other 55,701 2 Total 2,333,783 100 NALYSIS NALYSIS A EMAND D ASSENGER ASSENGER P
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TOP 25 DOMESTIC DESTINATIONS
Table 5.3 provides the top 25 domestic true markets. All FNL catchment area passengers used DEN. The top 25 destinations for FNL accounted for 58 percent of the travel to/from the FNL catchment area. Phoenix-Sky Harbor was the largest market with 124,461 annual passengers (170.5 PDEW). Los Angeles was the second largest market with 157.8 PDEW, followed by Seattle with 129.2 PDEW. San Francisco was the fourth largest market with 113.8 PDEW, while Las Vegas rounded out the top five markets with 104.0 PDEW. All top five markets had greater than 100 PDEW.
TABLE 5.3 TOP 25 DOMESTIC DESTINATIONS FNL DEN FLOWN DIVERTED TRUE RANK DESTINATION PAX PAX MARKET PDEW 1 Phoenix, AZ (PHX) 0 124,461 124,461 170.5 2 Los Angeles, CA 0 115,178 115,178 157.8 3 Seattle, WA 0 94,302 94,302 129.2 4 San Francisco, CA 0 83,089 83,089 113.8 5 Las Vegas, NV 0 75,922 75,922 104.0 6 Minneapolis, MN 0 60,871 60,871 83.4 7 Chicago, IL (ORD) 0 58,860 58,860 80.6
8 Dallas, TX (DFW) 0 58,031 58,031 79.5 9 Orlando, FL (MCO) 0 51,738 51,738 70.9
IRPORT 10 San Diego, CA 0 46,260 46,260 63.4 A 11 Atlanta, GA 0 46,079 46,079 63.1 12 New York, NY (LGA) 0 44,564 44,564 61.0 13 Boston, MA 0 44,438 44,438 60.9 EGIONAL EGIONAL
R 14 Philadelphia, PA 0 38,510 38,510 52.8 15 Orange County, CA 0 34,486 34,486 47.2 16 Portland, OR 0 33,114 33,114 45.4 17 Salt Lake City, UT 0 32,763 32,763 44.9 OLORADO
C 18 Austin, TX 0 30,324 30,324 41.5 19 Kansas City, MO 0 29,237 29,237 40.1 20 Detroit, MI 0 29,204 29,204 40.0 21 Tampa, FL 0 28,548 28,548 39.1 ORTHERN 22 New York, NY (JFK) 0 28,127 28,127 38.5 N
– 23 Washington, DC (IAD) 0 27,619 27,619 37.8 24 Chicago, IL (MDW) 0 27,166 27,166 37.2 25 St. Louis, MO 0 27,072 27,072 37.1
NALYSIS Top 25 destinations 0 1,269,963 1,269,963 1,739.7 A Total domestic 0 2,181,758 2,181,758 2,988.7
EMAND D ASSENGER ASSENGER P
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TOP 15 INTERNATIONAL DESTINATIONS
Table 5.4 shows the top 15 international destinations. Only the top 15 international destinations are shown due to the smaller market sizes involved with international itineraries and limited available data. The top 15 destinations made up 47 percent of total international passengers.
The top three international markets were Cancun, Mexico; London-Heathrow, UK; and Puerto Vallarta, Mexico. London-Heathrow, UK, and Mexico City, Mexico, San Jose del Cabo, Mexico, and Vancouver, Canada, rounded out the top five destinations. Only the top three markets had more than 10 PDEW.
TABLE 5.4 TOP 15 INTERNATIONAL DESTINATIONS FNL DEN FLOWN DIVERTED TRUE RANK DESTINATION PAX PAX MARKET PDEW 1 Cancun, Mexico 0 16,936 16,936 23.2 2 London, UK (LHR) 0 8,332 8,332 11.4 3 Puerto Vallarta, Mexico 0 7,402 7,402 10.1 4 San Jose del Cabo, Mexico 0 7,027 7,027 9.6
5 Vancouver, Canada 0 5,074 5,074 7.0 6 Paris-De Gaulle, France 0 3,921 3,921 5.4 7 Mexico City, Mexico 0 3,856 3,856 5.3 IRPORT
A 8 Calgary, Canada 0 2,995 2,995 4.1 9 Dublin, Ireland 0 2,814 2,814 3.9 10 Frankfurt, Germany 0 2,614 2,614 3.6
EGIONAL EGIONAL 11 Rome-Da Vinci, Italy 0 2,514 2,514 3.4 R 12 Toronto, Canada 0 2,478 2,478 3.4 13 Amsterdam, Netherlands 0 2,169 2,169 3.0 14 San Jose, Costa Rica 0 2,004 2,004 2.7
OLORADO 15 Munich, Germany 0 1,979 1,979 2.7 C Top 15 International 0 72,115 72,115 98.8 Total International 0 152,025 152,025 208.3 ORTHERN N
– NALYSIS A EMAND D ASSENGER ASSENGER P
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FEDERAL AVIATION ADMINISTRATION (FAA) GEOGRAPHIC REGIONS
It is important to identify and quantify air travel markets, but it is also important to measure air travel by specific geographic regions. Generally, airlines operate route systems that serve geographic areas. Additionally, most airline hubs are directional and flow passenger traffic to and from geographic regions, not just destinations within the region. Therefore, air service analysis exercises consider the regional flow of passenger traffic as well as passenger traffic to a specific city. Accordingly, this section analyzes the regional distribution of air travelers from the airport catchment area. For this exercise, the FAA geographic breakdown of the U.S. is used (Exhibit 5.3).
EXHIBIT 5.3 FAA GEOGRAPHIC REGIONS
IRPORT A EGIONAL EGIONAL R OLORADO C ORTHERN N
–
NALYSIS NALYSIS A EMAND D ASSENGER ASSENGER P
PAGE 24
West Largest REGIONAL DISTRIBUTION OF TRAVELERS Region The West region had Table 5.5 divides catchment area travel into the FAA's nine geographic regions and one catch-all international region. The the highest number of West region was the largest traveled region for FNL catchment area passengers, with 27 percent of the total catchment area air travelers, garnering 27 percent of FNL passengers. The Southeast region followed as the second largest region with 15 percent and the Great Lakes region was the catchment area third largest region with 13 percent. The International region was the seventh largest traveled region. travelers. TABLE 5.5 REGIONAL DISTRIBUTION OF TRAVEL REGION AIRPORT W SE GL E SW NW INTL C NE AK TOTAL Pax 627,189 348,847 301,534 259,720 257,046 207,407 152,025 95,817 67,496 16,703 2,333,783 DEN % 27 15 13 11 11 9 7 4 3 1 100
DISTRIBUTION OF INTERNATIONAL TRAVEL
Seven percent of catchment area travelers had international itineraries. TABLE 5.6 REGIONAL DISTRIBUTION OF Table 5.6 shows international travelers by region. Mexico and Central INTERNATIONAL PASSENGERS TRUE % OF
America was the most frequented international region with 32 percent, or REGION MARKET COLUMN Mexico & Central 49,405 of the total 152,025 catchment area international travelers, followed 49,405 32
IRPORT America A by Europe and Asia with 30 and 12 percent of the total, respectively. Europe 44,940 30 Asia 17,695 12 Canada 16,131 11
EGIONAL EGIONAL Caribbean 9,923 7
R Australia & Oceania 4,586 3 South America 3,941 3 Africa 3,878 3
OLORADO Middle East 1,525 1 C Total passengers 152,025 100
ORTHERN N
– NALYSIS NALYSIS A EMAND D ASSENGER ASSENGER P
PAGE 25
AIRLINES USED AT DEN
Table 5.7 shows the airlines used for the top 25 destinations. The airline market share is based on ARC data and is an estimation of carrier share. United Airlines had the largest share of catchment area passengers carrying an estimated 37 percent of diverting passengers. Southwest Airlines carried the second largest share of diverting passengers with 24 percent, followed by American Airlines with 13 percent, Delta Air Lines with 10 percent, Frontier Airlines with 8 percent and Alaska Airlines with 3 percent. All other airlines carried 5 percent of passengers.
TABLE 5.7 AIRLINES USED AT DEN AIRLINE % TOTAL RANK DESTINATION UA WN AA DL F9 AS OTHER DEN PAX 1 Phoenix, AZ (PHX) 25 29 42 1 3 0 0 124,461 2 Los Angeles, CA 35 21 19 18 4 2 1 115,178 3 Seattle, WA 16 11 1 35 5 32 0 94,302 4 San Francisco, CA 49 15 0 0 6 28 2 83,089 5 Las Vegas, NV 50 34 1 1 13 0 0 75,922 6 Minneapolis, MN 34 19 1 26 9 0 11 60,871
7 Chicago, IL (ORD) 49 0 35 1 14 0 1 58,860 8 Dallas, TX (DFW) 37 0 53 1 9 0 0 58,031
IRPORT 9 Orlando, FL (MCO) 53 23 5 2 17 0 1 51,738 A 10 San Diego, CA 46 39 3 2 10 0 0 46,260 11 Atlanta, GA 30 26 2 28 11 0 3 46,079 12 New York, NY (LGA) 47 17 3 26 6 0 0 44,564 EGIONAL EGIONAL
R 13 Boston, MA 47 23 3 2 0 0 25 44,438 14 Philadelphia, PA 23 20 43 2 10 0 0 38,510 15 Orange County, CA 49 32 0 2 17 0 0 34,486 16 Portland, OR 49 29 0 5 15 2 0 33,114 OLORADO 17 Salt Lake City, UT 18 27 0 42 13 0 0 32,763 C 18 Austin, TX 41 50 1 1 8 0 0 30,324 19 Kansas City, MO 42 51 1 1 6 0 0 29,237 20 Detroit, MI 33 18 1 41 7 0 0 29,204 ORTHERN 21 Tampa, FL 41 36 7 4 10 0 0 28,548 N
– 22 New York, NY (JFK) 0 0 2 47 0 0 51 28,127 23 Washington, DC (IAD) 63 31 1 1 4 0 0 27,619 24 Chicago, IL (MDW) 0 99 0 1 0 0 0 27,166
NALYSIS 25 St. Louis, MO 35 54 0 2 8 0 0 27,072 A Total top 25 36 25 12 11 8 4 3 1,269,963 Total all markets 37 24 13 10 8 3 5 2,333,783
EMAND D ASSENGER ASSENGER P
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SECTION 6. OPPORTUNITY ANALYSIS
his section reviews domestic airlines and their plans for Texpansion/retraction and individual hub focus. Current fleet mix by hub and fleet plans are discussed by airline. An opportunity assessment by airline for FNL is also included.
MAJOR NETWORK AIRLINES
Each of the major network airlines including American Airlines, Delta Air Lines, Southwest Airlines
IRPORT and United Airlines, are discussed in this section with a review of their existing departures and A seats by hub/focus city, equipment type used, and potential opportunities a FNL. Other airlines and their business models are reviewed in subsequent sections.
EGIONAL EGIONAL R American Airlines
OLORADO Post-merger with US Airways, American Airlines is the largest airline in the world with numerous C hubs across the US. American has been investing in fortifying their existing hubs, and with a large influx of new aircraft, American is on the path to have the youngest fleet of the legacy airlines.
ORTHERN N Table 6.1, next page, compares American’s departures and seats in July 2018 with the prior year. – Overall, average daily seats and departures increased 1 percent. The most significant hub changes on a percentage basis year-over-year was at Chicago-O’Hare and Philadelphia. Several hubs had NALYSIS
A decreases in seats and departures including Charlotte, Miami, Phoenix-Sky Harbor and Los Angeles.
EMAND D ASSENGER ASSENGER P
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Reduction in TABLE 6.1 AMERICAN AIRLINES - DEPARTURES AND SEATS BY HUB JULY 2018 % CHANGE YOY Smaller Regional HUB/ AVG DAILY AVG DAILY AVG SEATS/ AVG DAILY AVG DAILY AVG SEATS/ Jets and FOCUS CITY SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE Turboprops Dallas, TX (DFW) 99,180 778 128 3 3 (0) Year-over-year, Charlotte-Douglas, NC 70,159 652 108 (2) (2) (0) American’s use of 50- Chicago, IL (ORD) 50,982 482 106 4 1 2 seat or smaller Miami, FL 47,956 337 142 (3) (2) (1) regional jets and Philadelphia, PA 41,703 396 105 12 6 6 turboprop aircraft Phoenix, AZ (PHX) 34,418 262 131 (2) (1) (1) declined. Los Angeles, CA 27,785 199 139 (3) (4) 1 Washington, DC (DCA) 20,172 233 86 1 2 (1) Total all markets 738,951 6,587 112 1 1 (0) Source: Diio Mi; As of 9/27/18
Table 6.2 outlines the aircraft in use in July 2018. Forty-seven percent of departures were provided on Airbus, Boeing or McDonnell Douglas (MD) mainline aircraft. Twenty percent of departures were with 50-seat or smaller regional jet aircraft, up from 19 percent in July 2017. Less than 1 percent of departures were provided with turboprop aircraft. Aircraft with the highest percentage change since July 2017 included a 64 percent increase in Embraer Regional Jet (ERJ) 140/145 aircraft, a 51
percent decrease in Canadair Regional Jet (CRJ) 200 aircraft and a 98 percent decrease in Bombardier Q200/300 aircraft.
TABLE 6.2 AMERICAN AIRLINES - AIRCRAFT IN USE IRPORT
A AIRCRAFT SEATING AVERAGE DAILY DEPARTURES TYPE CAPACITY JULY 2018 JULY 2017 % CHANGE Boeing 737 160 1,159 1,060 9
EGIONAL EGIONAL Embraer ERJ-140/145 44-50 981 599 64 R Embraer E-170/175 76 757 723 5 Airbus A321 102-187 754 755 (0) Canadair CRJ-700 63-70 674 574 4
OLORADO Canadair CRJ-900 76 659 680 (3)
C Airbus A319 128 528 517 2 Canadair CRJ-200 50 310 629 (51) Airbus A320 150 183 189 (3)
ORTHERN McDonnell Douglas MD80 140 182 226 (20) N Embraer E-190 99 100 92 9 – Boeing 777 260-310 99 85 16 Boeing 757 176-188 67 114 (41) Boeing 787 226-285 48 38 27 NALYSIS NALYSIS
A Airbus A330 258-291 44 45 (1) Boeing 767 209 41 55 (25) Bombardier Q200/300 35-48 3 130 (98) EMAND
D Total 6,587 6,510 1 Source: Diio Mi; As of 9/28/18 ASSENGER ASSENGER P
PAGE 28
American has embarked on a massive fleet renewal process that will last until the end of the decade, and at the end of 2017, its fleet will was the youngest of any of the major airlines in the US. They are replacing MD80 and Boeing 757 aircraft with Airbus A319 and A321 aircraft, while replacing much of the Boeing 767 and Airbus A330 fleets with new wide-body aircraft such as Boeing 787s. This has created significant flux in the departures and capacities on many routes as they are rightsizing their schedules for each market. These changes are predominately resulting in larger gauge (more seats) than the older aircraft. On the regional side, American Eagle is also going through a massive re-fleeting post-merger. American had the smallest fleet of large regional jets of any of the legacy carriers, limited by very strict scope clauses. Upon entering bankruptcy, American was able to increase the number and size of the large regional jets significantly, allowing for hundreds of 76-seat aircraft. While American had parked all of its 37- and 44-seat aircraft post-merger, they were forced to “un-retire” more than 50 44-seat regional jets to act as a backfill for 50-seat regional jets that are operated by Air Wisconsin, whose contract was up and decided to execute a new contract with United Airlines and not American.
American has invested heavily in facilities at Charlotte and Dallas-Fort Worth and will be opening a significant number of new gates at both hubs in 2019, allowing for growth. American has publicly discussed the desire to grow their Dallas-Fort Worth
hub from 800 daily departures to 900 daily departures in 2019. Much of that growth will be on American Eagle.
IRPORT
A American has announced it will be returning to Cheyenne Regional Airport in 2019, supported by a very large minimum revenue guarantee funded by state and local governments. While Cheyenne had service before with American that failed and had been suspended, this new service could be a bellwether for FNL. If the Cheyenne service is able to succeed this time, EGIONAL EGIONAL
R overcoming its proximity to ultra-low fares at DEN, then it could demonstrate that FNL service could also work. However, it is unlikely that American would consider service to FNL without a very large ($1-2 million) minimum revenue guarantee to support the service.
OLORADO C Delta Air Lines
ORTHERN Delta has consistently ranked as one of the top airlines for operational performance and customer service and continues to N
– evolve as an airline focusing on operational and product excellence. They have also been active in route network adjustments, with Memphis no longer being a hub and Cincinnati now considered a focus city like Raleigh-Durham. Across the Delta system, Delta operates an extensive route network with hubs/focus cities at Atlanta, Detroit, Minneapolis, Salt Lake City, New NALYSIS
A York Kennedy and LaGuardia, Los Angeles and Seattle. Table 6.3, next page, provides frequency and capacity changes at Delta’s hubs. All hubs except Minneapolis had an increase in seats compared to July 2017. Atlanta continues to be the largest
EMAND hub in the world for a single airline, with more than 985 daily departures. The most significant year-over-year growth on a D percentage basis was at Seattle, with an 11 percent increase in seats and 6 percent increase in departures. ASSENGER ASSENGER P
PAGE 29
TABLE 6.3 DELTA AIR LINES - DEPARTURES AND SEATS BY HUB JULY 2018 % CHANGE YOY AVG DAILY AVG DAILY AVG SEATS/ AVG DAILY AVG DAILY AVG SEATS/ HUB SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE Atlanta, GA 139,695 985 142 3 1 2 Minneapolis, MN 47,708 407 117 (1) (1) (0) Detroit, MI 44,632 407 110 2 (2) 4 New York, NY (JFK) 31,149 222 141 3 2 1 Salt Lake City, UT 30,304 255 119 6 3 3 Los Angeles, CA 24,607 159 154 6 (2) 8 Seattle, WA 22,393 165 135 11 6 5 New York, NY (LGA) 21,704 233 93 5 3 2 Total all markets 688,247 5,569 124 3 1 2 Source: Diio Mi; As of 9/28/18
Delta’s fleet distribution by hub is depicted in Table 6.4. Delta has continued to reduce the total number of 50-seat regional jets in its network while adding larger regional jets and mainline flying. Numerous aircraft types experienced year-over-year decreases in utilization, including the CRJ series that was in part replaced with ERJ-170/175 aircraft. On the mainline side, the most notable changes was the significant increase in Airbus A321 and Boeing 737 aircraft and the reduction in the MD-
88/90 aircraft.
IRPORT TABLE 6.4 DELTA AIR LINES - AIRCRAFT IN USE A AIRCRAFT SEATING AVERAGE DAILY DEPARTURES TYPE CAPACITY JULY 2018 JULY 2017 % CHANGE McDonnell Douglas MD-88/90 149-158 794 889 (11) EGIONAL EGIONAL Canadair CRJ-900 76 726 736 (1) R Canadair CRJ-200 50 718 822 (13) Boeing 737 124-180 697 607 15 Embraer E-170/175 69-76 525 416 26
OLORADO Boeing 717 110 467 469 (0) C Boeing 757 168-234 362 352 3 Canadair CRJ-700 69 344 395 (13) Airbus A320 150-160 240 254 (5)
ORTHERN Airbus A321 192 228 104 120 N
– Airbus A319 132 217 226 (4) Boeing 767 208-261 143 151 (5) Airbus A330 234-293 72 74 (3)
NALYSIS Boeing 777 291 22 24 (7) A Airbus A350 306 13 0 100 Boeing 747 376 0 8 (100)
EMAND Total 5,569 5,527 1
D Source: Diio Mi; As of 9/28/18 ASSENGER ASSENGER P
PAGE 30
Delta continues to evolve its fleet and is receiving the first of 75 of the Airbus A220 series aircraft (formerly the Bombardier C-Series) soon, which will fit in size between the Boeing 717 and 737 aircraft. Delta has stated that the purpose of those aircraft will be to replace more 50-seat regional jets, leaving just a fraction of what Delta operated at one point. Delta is also expanding their fleet with the CRJ-900 and ERJ-175 larger regional jets and will continue to receive new Boeing 737-900ER aircraft through 2018.
Delta is the least likely of the legacy airlines to consider service at FNL. It has added very few markets like FNL in the last decade, and as they continue to shift from 50-seat regional jets to small mainline aircraft like the Airbus A220, Delta will spend the majority of its network planning efforts on retaining current service, and not growth into new markets like FNL.
Southwest Airlines
In October 2014, the Wright Amendment, which restricted operations by Southwest at Dallas-Love field, expired and led to new nonstop service to markets like Los Angeles, San Diego and Phoenix. Southwest continues to grow its capacity each year; however, capacity increases are predominately due to replacing smaller, older Boeing 737-300 aircraft with larger Boeing
737-800 and Max 8 aircraft. Southwest discontinued use of the smaller Boeing 737-300 aircraft in October 2017. New rules for ground handling and scheduling will allow limited seasonal and less-than-daily service in the future.
IRPORT A Table 6.5 compares Southwest’s focus city average daily departures and seats in July 2018 with the prior year. All markets except Chicago-Midway and Baltimore, experienced increases in capacity over July 2017. The most significant percentage EGIONAL EGIONAL
R increase in capacity and departures occurred at St. Louis and San Diego. Overall seats increased 3 percent while departures increased 2 percent year-over-year.
OLORADO TABLE 6.5 SOUTHWEST AIRLINES - DEPARTURES AND SEATS BY FOCUS CITY C JULY 2018 % CHANGE YOY AVG AVG AVG AVG AVG AVG DAILY DAILY SEATS/ DAILY DAILY SEATS/ FOCUS CITY/HUB SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE ORTHERN N
Chicago, IL (MDW) 38,391 252 153 (0) (1) 1 – Baltimore, MD 33,811 221 153 (1) (2) 1 Las Vegas, NV 31,792 209 152 2 0 2 Denver, CO 31,592 205 154 2 1 1 NALYSIS
A Dallas, TX (DAL) 26,064 174 150 3 1 2 Phoenix, AZ (PHX) 25,707 170 151 3 2 1 Houston, TX (HOU) 24,749 164 151 5 4 1 EMAND Orlando, FL (MCO) 19,477 126 155 2 (1) 3 D Los Angeles, CA 18,151 121 149 1 (1) 2 ASSENGER ASSENGER P
PAGE 31
Southwest Unlikely TABLE 6.5 SOUTHWEST AIRLINES - DEPARTURES AND SEATS BY FOCUS CITY JULY 2018 % CHANGE YOY at FNL AVG AVG AVG AVG AVG AVG With a very large hub DAILY DAILY SEATS/ DAILY DAILY SEATS/ in DEN less than an FOCUS CITY/HUB SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE hour away, it is unlikely Atlanta, GA 17,630 118 149 1 1 (0) that Southwest would Oakland, CA 17,425 116 150 4 3 1 consider service at St. Louis, MO 16,897 113 150 7 7 0 FNL, as it would split San Diego, CA 16,835 111 151 6 5 1 its operations in what Nashville, TN 15,204 102 150 5 4 0 they would consider Total all markets 600,694 3,993 150 3 2 1 the same geographic Source: Diio Mi; As of 9/28/18 catchment area. Table 6.6 outlines Southwest’s aircraft fleet in use. Southwest operates a fleet of Boeing 737 aircraft. As noted previously, Southwest discontinued use of Boeing 737-300 aircraft and has been replacing them with a combination of Boeing 737-700, 737-800 and Max 8 aircraft.
TABLE 6.6 SOUTHWEST AIRLINES - AIRCRAFT IN USE AVERAGE DAILY DEPARTURES AIRCRAFT SEATING JULY JULY %
TYPE CAPACITY 2018 2017 CHANGE Boeing 737-700 143 3,067 2,823 9
IRPORT Boeing 737-800 175 853 715 19 A Boeing 737-Max 8 175 73 0 100 Boeing 737-300 137-143 0 379 (100) Total 3,993 3,917 2 EGIONAL EGIONAL
R Source: Diio Mi; As of 9/28/18
The Boeing 737-800 and Max-8 fleet is significantly larger in term of seats than the other aircraft and is the bulk of the new
OLORADO aircraft deliveries that Southwest has scheduled going forward. This will apply pressure to markets that are potentially on the C bubble to support mainline Southwest service, since the Boeing 737-800 aircraft seat 175 instead of 122 or 143 seats of the older aircraft.
ORTHERN N With a very large hub in DEN less than an hour away, it is unlikely that Southwest would consider service at FNL, as it would – split its operations in what they would consider the same geographic catchment area.
NALYSIS NALYSIS A EMAND D ASSENGER ASSENGER P
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United Airlines
With United’s financial performance, on-time performance and other metrics lagging the industry in the mid 2010s, United looked towards changes in management. United has experienced significant upper management turnover. With the change in management, United is looking for growth and has focused on smaller “heartland” markets to increase their presence across the US.
United operates hubs at Houston-Intercontinental, Chicago-O’Hare, Newark, DEN, San Francisco, Washington-Dulles and, to a lesser extent, Los Angeles. Table 6.7 shows seat and departure growth at each of United’s hubs year-over-year. All hubs experienced increases in daily seats while the Houston hub was the only hub to experience a slight decrease in departures. The most significant increases on a percentage basis for seats occurred at the DEN and Los Angeles hubs, with both markets experiencing double digit departure increases. Overall, United’s seats and departures increased 5 and 6 percent, respectively, year-over-year.
TABLE 6.7 UNITED AIRLINES - DEPARTURES AND SEATS BY HUB JULY 2018 % CHANGE YOY AVG AVG AVG AVG AVG AVG
HUB/FOCUS DAILY DAILY SEATS/ DAILY DAILY SEATS/ MARKET SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE Chicago, IL (ORD) 64,489 619 104 2 7 (5) IRPORT
A Houston, TX (IAH) 57,665 504 114 6 (0) 6 Newark, NJ 53,100 429 124 5 4 2 Denver, CO 46,830 445 105 8 12 (3)
EGIONAL EGIONAL San Francisco, CA 45,993 307 150 3 3 0
R Washington, DC (IAD) 26,866 242 111 5 8 (3) Los Angeles, CA 22,892 165 139 13 17 (3) Total all markets 571,870 5,089 112 5 6 (1)
OLORADO C Table 6.8, next page, provides the average daily departures by aircraft for July 2018. United continues to alter its regional fleet significantly. The Bombardier Q400 turboprop aircraft were completely retired in 2016, eliminating over 100 daily departures at one point in time. Use of the 50-seat regional jet aircraft account for nearly 1,500 daily departures for the United network, or 29 ORTHERN N
percent of departures. Despite the increase from July 2017 to July 2018, retirements for the 50-seat aircraft are expected to – accelerate over the next couple of years, as the contracts with partners such as ExpressJet were adjusted to park the small regional jets in favor of larger regional jets and mainline aircraft, but the timing is now in question.
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TABLE 6.8 UNITED AIRLINES - AIRCRAFT IN USE AVERAGE DAILY DEPARTURES AIRCRAFT SEATING JULY JULY % TYPE CAPACITY 2018 2017 CHANGE Boeing 737 118-179 1,247 1,189 5 Embraer E-170/175 69-76 919 846 9 Embraer E-145 50 744 841 (12) Canadair CRJ-200 50 742 412 80 Airbus A320 150 376 370 2 Canadair CRJ-700 70 309 338 (9) Airbus A319 128 302 268 12 Boeing 757 142-213 193 185 4 Boeing 777 267-366 133 128 4 Boeing 767 183-242 75 82 (9) Boeing 787 219-252 49 45 10 DeHavilland DHC-8-200/300 37-50 0 71 (100) Boeing 747 374 0 14 (100) ATR-42/72 46 0 11 (100) Total 5,089 4,801 6 Source: Diio Mi; As of 9/28/18
Similar to other legacy carriers, United has placed orders for new mainline aircraft to replace older mainline aircraft as well as some regional jet aircraft. With the change in management, United has adjusted several orders for different aircraft that it IRPORT A today feels would better fit its business model. This includes adjustments to narrow- and wide-body jet aircraft produced by Boeing and Airbus. United over the past few years has dramatically increased its focus on smaller, underserved markets in the
EGIONAL EGIONAL Midwest, coined their “Heartland Initiative”. They added numerous new routes to Chicago and DEN and continue to look at R adding more of these markets. Their focus on growth has been primarily at their Washington-Dulles, Chicago-O’Hare and DEN hubs.
OLORADO
C With their fastest growing hub less than an hour from FNL, it is unlikely that United would be interested in serving FNL due to the risks of diluting their current service at DEN.
ORTHERN N
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ULTRA LOW-COST AIRLINES
This section includes a discussion of carriers considered to be ultra- low-cost airlines, including: Allegiant, Frontier Airlines and Spirit Airlines.
Allegiant Air
Allegiant has been changing their strategy with the majority of its growth since 2014 in larger markets such as Austin, Cincinnati, Cleveland, Indianapolis, Newark, New Orleans and Pittsburgh. Allegiant continues to discuss opportunities to Mexico and the Caribbean.
In general, Allegiant’s leisure destination oriented service is focused primarily on service to Orlando-Sanford, Tampa-St. Petersburg, Las Vegas, Punta Gorda and Phoenix-Mesa with limited service in select other markets such as Cincinnati and
Fort Lauderdale. Service is typically provided through secondary airports (e.g., Sanford, Mesa) and is generally on a less-than- daily basis (two to three times weekly) from cities having limited access to service at larger airports. Table 6.9 compares
IRPORT Allegiant’s average weekly departures and seats in July 2018. Allegiant’s primary growth is in Florida markets. Overall seats A and departures increased 15 percent.
EGIONAL EGIONAL TABLE 6.9 ALLEGIANT AIR - DEPARTURES AND SEATS BY FOCUS CITY R JULY 2018 % CHANGE YOY AVG AVG AVG AVG AVG AVG WEEKLY WEEKLY SEATS/ WEEKLY WEEKLY SEATS/ FOCUS CITY SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE OLORADO
C Orlando, FL (SFB) 36,167 217 167 6 7 (1) St. Petersburg, FL 28,964 171 170 15 17 (2) Las Vegas, NV 28,215 178 158 (4) 2 (6) Punta Gorda, FL 18,455 105 176 22 20 1 ORTHERN
N Phoenix, AZ (AZA) 17,691 104 171 18 8 9
– Cincinnati, OH 15,555 88 176 57 43 10 Fort Lauderdale, FL 11,421 65 177 27 25 2 Fort Walton Beach, FL 11,132 63 177 58 55 2 NALYSIS Myrtle Beach, SC 9,954 57 174 23 16 6 A Total all markets 392,710 2,330 169 15 15 1 Source: Diio Mi; As of 9/28/18
EMAND D ASSENGER ASSENGER P
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Table 6.10 provides Allegiant’s aircraft in use for July 2018. Allegiant has been aggressively transforming its fleet from a MD- 80 operation to an Airbus fleet. The MD80 fleet is down to just 14 percent of daily departures and will continue to shrink as MD80s are replaced by the Airbus A319/320-series. This fleet change has had a profound impact on the schedule model for the airline. The MD80 aircraft were inexpensive aircraft to purchase but expensive to operate due to their relative older age (high fuel and maintenance costs). The transition to a younger Airbus fleet increases the ownership costs, while reducing the relative cost for fuel and maintenance. This change will likely necessitate the airline to operate the aircraft more each week on average, and limit its ability to park the airplanes on historically slower days such as Tuesday, Wednesday or Saturday.
TABLE 6.10 ALLEGIANT AIR - AIRCRAFT IN USE AVERAGE WEEKLY DEPARTURES AIRCRAFT SEATING JULY JULY % TYPE CAPACITY 2018 2017 CHANGE Airbus A320 177 1,237 664 86 Airbus A319 156 765 547 40 McDonnell Douglas MD-80 166 328 800 (59) Boeing 757 223 0 20 (100) Total 2,330 2,031 15 Source: Diio Mi; As of 9/28/18
Allegiant will fully retire its MD-80 fleet by the end of November 2018, which will have a significant impact on the number of
IRPORT aircraft available to schedule in 2019. With new and used aircraft deliveries expected to catch up with those aircraft A retirements by mid-2019, Allegiant has discussed significant growth in the foreseeable future. With plans on adding 10 new aircraft to their fleet every year, there will undoubtedly be new opportunities around the country. Allegiant still plans on adding
EGIONAL EGIONAL international service “soon”, which could very well occupy much of the growth aircraft for several years once implemented. R
FNL had Allegiant service in the past and all indications are that they performed well in the market. With a large immediate catchment area population and the ability to draw from the entire Denver area, it is likely that Allegiant could base multiple OLORADO
C aircraft at FNL and serve numerous destinations, not just their traditional leisure markets such as Las Vegas, Phoenix-Mesa or Orlando-Sanford, but also their large markets such as Cincinnati, Pittsburgh or Austin. Low airport costs are critical to “winning the hearts” of Allegiant, but the competition for their aircraft is only increasing as they continue to shift their growth from small ORTHERN N
markets (such as Grand Island, Nebraska) to medium and large markets like Cincinnati or Austin. –
NALYSIS A EMAND D ASSENGER ASSENGER P
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Frontier Airlines
Frontier was purchased by Indigo Partners, which previously owned Spirit Airlines. Indigo has transformed Frontier into an ultra-low-cost carrier, similar to Spirit Airlines. Frontier has become less Denver centric and has been focusing on opportunistic growth in larger markets. Their existing growth has been in very large markets, while canceling service to smaller markets.
Frontier is actively growing their hub/focus cities (Table 6.11) focusing on markets with significant local demand. Frontier continued reductions at DEN, reducing capacity and departures by 3 percent, while Philadelphia and Austin grew significantly year-over-year. In total, Frontier’s average daily seats increased 14 percent while departures increased 11 percent.
TABLE 6.11 FRONTIER AIRLINES - DEPARTURES AND SEATS BY FOCUS CITY JULY 2018 % CHANGE YOY AVG AVG AVG AVG AVG AVG FOCUS CITY/ DAILY DAILY SEATS/ DAILY DAILY SEATS/ HUB SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE Denver, CO 12,503 68 184 (3) (3) (0) Orlando, FL (MCO) 5,092 25 207 2 (5) 8 Las Vegas, NV 3,444 18 194 (4) (8) 4
IRPORT Philadelphia, PA 3,411 17 199 34 22 10 A Austin, TX 2,487 14 172 137 163 (10) Cincinnati, OH 2,190 12 189 (12) (16) 4 Atlanta, GA 1,968 10 188 3 (13) 18 EGIONAL EGIONAL Chicago, IL (ORD) 1,892 10 189 (14) (9) (5) R Cleveland, OH 1,784 8 219 (31) (35) 6 Total all markets 67,180 357 188 14 11 3 Source: Diio Mi; As of 9/28/18
OLORADO C Frontier continues to adjust their Airbus fleet mix (Table 6.12). Frontier’s smallest aircraft, the Airbus A319 (150 seats), decreased by 41 percent in departures, while the Airbus A320 (180 seats) and A321 (230 seats) had significant growth.
ORTHERN N
– TABLE 6.12 FRONTIER AIRLINES - AIRCRAFT IN USE AVERAGE DAILY DEPARTURES AIRCRAFT SEATING JULY JULY % TYPE CAPACITY 2018 2017 CHANGE NALYSIS
A Airbus A320 180 211 150 40 Airbus A321 230 92 78 18 Airbus A319 150 54 93 (41) EMAND
D Total 357 321 11 Source: Diio Mi; As of 9/28/18 ASSENGER ASSENGER P
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While Frontier has their primary hub at DEN, they are a very distant third in terms of market share at DEN and will likely struggle to gain market share as United and Southwest continue to grow. This could lead to a situation in which Frontier looks at growth at FNL as a way to grab market share without the direct competition at DEN.
Spirit Airlines
Spirit has been actively growing their presence in point-to-point markets. Spirit plans significant growth, but their current growth has been focused in larger markets that can support daily service using aircraft with high density seating. In general, Spirit service has been less than stable with their fleet being redeployed to markets perceived to offer a greater opportunity.
Spirit primarily serves leisure markets with a focus on Fort Lauderdale, Orlando-International, Las Vegas, Detroit, Chicago- O’Hare, Baltimore, Los Angeles, Dallas-Fort Worth and Atlanta. Table 6.13 compares average departures and seats in July 2018 with the prior year. Overall Spirit’s seats and departures increased 18 and 15 percent, respectively. The most significant percentage increases (greater than 20 percent capacity and departures) occurred in the Las Vegas, Orlando-International, Dallas-Fort Worth and Baltimore markets.
TABLE 6.13 SPIRIT AIRLINES - DEPARTURES AND SEATS BY HUB JULY 2018 % CHANGE YOY AVG AVG AVG AVG AVG AVG IRPORT
A HUB/FOCUS DAILY DAILY SEATS/ DAILY DAILY SEATS/ CITY SEATS DEPARTURES DEPARTURE SEATS DEPARTURES DEPARTURE Fort Lauderdale, FL 12,350 67 185 13 14 (1) Las Vegas, NV 7,451 41 182 24 24 (0) EGIONAL EGIONAL
R Orlando, FL (MCO) 7,216 39 185 34 30 3 Dallas, TX (DFW) 6,340 35 181 24 25 (1) Chicago, IL (ORD) 6,150 30 205 9 0 9 Detroit, MI 5,764 31 185 19 16 3 OLORADO
C Los Angeles, CA 4,859 26 190 2 (4) 6 Baltimore, MD 4,833 28 174 34 27 6 Houston, TX (IAH) 4,602 22 209 8 (3) 11 Atlanta, GA 4,183 25 170 28 19 7 ORTHERN
N Myrtle Beach, SC 3,490 20 173 15 19 (3)
– Total all markets 104,319 570 183 18 15 3 Source: Diio Mi; As of 9/28/18
NALYSIS
A Spirit operates the Airbus A319, A320 and A321 aircraft with more than half of departures on the 178- to 182-seat A320 aircraft (Table 6.14, next page). Spirit continues to grow its fleet significantly, with a doubling in capacity expected by 2020.
EMAND This growth is coming predominately in the largest sized aircraft, the Airbus A320 and A321. However, Spirit plans to increase D the number of A319 aircraft and begin serving mid-size markets previously not considered a fit with Spirit’s business model. ASSENGER ASSENGER P
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TABLE 6.14 SPIRIT AIRLINES - AIRCRAFT IN USE AVERAGE DAILY DEPARTURES SEATING JULY JULY % AIRCRAFT TYPE CAPACITY 2018 2017 CHANGE Airbus A320 178-182 278 253 10 Airbus A319 145 155 152 2 Airbus A321 218-228 137 90 52 Total 570 496 15 Source: Diio Mi; As of 9/28/18
Spirit was the first of the ultra-low-cost carriers in the US and has been growing tremendously for years, predominately in larger markets such as Atlanta, Los Angeles, Chicago and Dallas-Fort Worth. They operate at relatively few secondary airports like FNL and, with their service already at DEN, FNL is not likely an immediate opportunity for them.
OTHER AIRLINES
Other airline opportunities may arise such as pro-rate flying on regional airlines like SkyWest Airlines or scheduled charter
service on evolving carriers such as JetSuiteX, Elite Airways or Via Air. SkyWest operates all pro-rate service with the CRJ- 200 and, due to profitability impacts of longer haul flights, typically operates pro-rate at stage lengths under 700 miles. There IRPORT
A are also many discussions ongoing regarding startup airlines throughout the US; however, due to DEN being one of the highest number of seats per capita, the initial risk of startup service at FNL would likely require significant incentives from the community. Without a Federal Inspection Station (FIS), international service is limited to international airports that offer pre- EGIONAL EGIONAL
R clearance facilities. OLORADO C ORTHERN N
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APPENDIX A. TOP 50 TRUE MARKETS
TABLE A.1 TOP 50 TRUE MARKETS FNL DEN REPORTED DIVERTING TRUE RANK DESTINATION PAX PAX MARKET PDEW 1 Phoenix, AZ (PHX) 0 124,461 124,461 170.5 2 Los Angeles, CA 0 115,178 115,178 157.8 3 Seattle, WA 0 94,302 94,302 129.2 4 San Francisco, CA 0 83,089 83,089 113.8 5 Las Vegas, NV 0 75,922 75,922 104.0 6 Minneapolis, MN 0 60,871 60,871 83.4 7 Chicago, IL (ORD) 0 58,860 58,860 80.6
8 Dallas, TX (DFW) 0 58,031 58,031 79.5 9 Orlando, FL (MCO) 0 51,738 51,738 70.9 10 San Diego, CA 0 46,260 46,260 63.4 IRPORT
A 11 Atlanta, GA 0 46,079 46,079 63.1 12 New York, NY (LGA) 0 44,564 44,564 61.0 13 Boston, MA 0 44,438 44,438 60.9 14 Philadelphia, PA 0 38,510 38,510 52.8 EGIONAL EGIONAL
R 15 Orange County, CA 0 34,486 34,486 47.2 16 Portland, OR 0 33,114 33,114 45.4 17 Salt Lake City, UT 0 32,763 32,763 44.9 18 Austin, TX 0 30,324 30,324 41.5 OLORADO
C 19 Kansas City, MO 0 29,237 29,237 40.1 20 Detroit, MI 0 29,204 29,204 40.0 21 Tampa, FL 0 28,548 28,548 39.1 22 New York, NY (JFK) 0 28,127 28,127 38.5 ORTHERN
N 23 Washington, DC (IAD) 0 27,619 27,619 37.8
– 24 Chicago, IL (MDW) 0 27,166 27,166 37.2 25 St. Louis, MO 0 27,072 27,072 37.1 26 Miami, FL 0 25,739 25,739 35.3
NALYSIS 27 Fort Lauderdale, FL 0 24,764 24,764 33.9 A 28 Houston, TX (IAH) 0 24,141 24,141 33.1 29 Charlotte-Douglas, NC 0 23,836 23,836 32.7
EMAND 30 Dallas, TX (DAL) 0 22,580 22,580 30.9 D 31 Nashville, TN 0 22,344 22,344 30.6 ASSENGER ASSENGER P
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TABLE A.1 TOP 50 TRUE MARKETS FNL DEN REPORTED DIVERTING TRUE RANK DESTINATION PAX PAX MARKET PDEW 32 New Orleans, LA 0 21,634 21,634 29.6 33 Newark, NJ 0 21,134 21,134 29.0 34 San Antonio, TX 0 20,965 20,965 28.7 35 Washington, DC (DCA) 0 20,852 20,852 28.6 36 Milwaukee, WI 0 20,349 20,349 27.9 37 Houston, TX (HOU) 0 19,824 19,824 27.2 38 San Jose, CA 0 19,646 19,646 26.9 39 Sacramento, CA 0 19,154 19,154 26.2 40 Indianapolis, IN 0 18,758 18,758 25.7 41 Omaha, NE 0 18,603 18,603 25.5 42 Baltimore, MD 0 18,260 18,260 25.0 43 Cancun, Mexico 0 16,936 16,936 23.2 44 Raleigh/Durham, NC 0 16,218 16,218 22.2 45 Pittsburgh, PA 0 14,259 14,259 19.5 46 Fort Myers, FL 0 14,251 14,251 19.5 47 Cleveland, OH 0 13,814 13,814 18.9 48 Oakland, CA 0 13,484 13,484 18.5
49 Anchorage, AK 0 12,905 12,905 17.7 50 Oklahoma City, OK 0 12,885 12,885 17.7
IRPORT Top 50 Destinations 0 1,747,298 1,747,298 2,393.6 A Total Domestic 0 2,181,758 2,181,758 2,988.7 Total International 0 152,025 152,025 208.3 Total All Markets 0 2,333,783 2,333,783 3,197.0 EGIONAL EGIONAL R
OLORADO C
ORTHERN N
– NALYSIS A EMAND D ASSENGER ASSENGER P
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APPENDIX B. GLOSSARY
Airport catchment area (ACA) Average airfare Hub The geographic area surrounding an airport The average of the airfares reported by the An airport used by an airline as a transfer point from which that airport can reasonably expect to airlines to the U.S. DOT. The average airfare to get passengers to their intended destination. draw passenger traffic. The airport catchment does not include taxes or passenger facility It is part of a hub and spoke model, where area is sometimes called the service area. charges and represents one-half of a travelers moving between airports not served by roundtrip ticket. direct flights change planes en route to their Airport codes destination. Also an airport classification system AZA ...... Phoenix-Mesa, AZ Destination airport used by the FAA (e.g., non-hub, small hub, DAL ...... Dallas-Love Field, TX Any airport where the air traveler spends four medium hub, and large hub. DCA ...... Washington-National, DC hours or more. This is the Federal Aviation DEN ...... Denver, CO Administration definition. Large hub DFW ...... Dallas-Fort Worth, TX An airport with one percent or more of total US FNL ...... Fort Collins, CO Diversion annual passenger boardings. HOU ...... Houston-Hobby, TX IRPORT Passengers who do not use the local airport for A IAD ...... Washington-Dulles, DC air travel, but instead use a competing airport to Load factor IAH ...... Houston-Intercontinental, TX originate the air portion of their trip. The percentage of airplane capacity that is used JFK ...... New York-Kennedy, NY EGIONAL EGIONAL by passengers. R LGA ...... New York-LaGuardia, NY Enplanement LHR ...... London-Heathrow, UK A passenger boarding a commercial aircraft. Local market MCO ...... Orlando-International, FL
OLORADO The number of air travelers who travel between
C MDW ...... Chicago-Midway, IL FAA two points via nonstop air service. ORD ...... Chicago-O’Hare, IL
PHX ...... Phoenix-Sky Harbor, AZ Acronym for the Federal Aviation Administration. ORTHERN SFB ...... Orlando-Sanford, FL Low-cost airline N
– A category of airlines that has emerged since ARC deregulation which offer low fares, minimal Acronym for Airline Reporting Corporation. amenities, and serve primarily high volume NALYSIS A markets.
EMAND D ASSENGER ASSENGER P
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Medium hub Passenger Facility Charge Retained passengers (retention) A hub with at least 0.25 percent but less than Fee imposed by airports of $1 to $4.50 on Passengers who use the local airport for air one percent of total US annual passenger enplaning passengers. The fees are used by travel instead of using a competing airport to boardings. airports to fund FAA approved airport originate the air portion of their trip. improvement projects. Network carrier Scheduled air service The category assigned to the large hub and Pax Flights provided between cities at pre-planned spoke airlines with nationwide route networks. Abbreviation for passengers. departure and arrival times.
Non-hub PDEW Small hub Abbreviation for passengers daily each way. An airport with more than 10,000 but less than An airport with at least 0.05 but less than 0.25
0.05 percent of the total US annual passenger percent of the total US passenger annual boardings. Point-to-point boardings. Nonstop service that does not stop at an airline’s hub and whose primary purpose is to Nonstop flight Stage length carry local traffic rather than connecting traffic. Air travel between two points without stopping Distance of itinerary nonstop leg.
at an intermediate airport. RASM IRPORT True market A Acronym for Revenue per Available Seat Mile, Onboard passengers Total number of air travelers, including those also referred to as unit revenue. Available seat- The number of passengers transported on one who are using a competing airport, in the
EGIONAL EGIONAL miles are aircraft miles flown on each flight flight segment. geographic area served by BTM. The true R multiplied by the seat capacity available for market estimate includes the size of the total sale. Passenger revenue is the number of Origin and destination (O&D) market and for specific destinations. paying passengers flown multiplied by the fare
OLORADO
C passengers they paid. Turboprop aircraft Includes all originating and destination passengers. In the context of this report, it A type of engine that uses a jet engine to turn a Regional airline propeller. Turboprops are often used on ORTHERN describes the passengers arriving and N Airlines that specialize in serving smaller regional and business aircraft because of their – departing an airport. markets with smaller aircraft normally in relative efficiency at speeds slower than, and Originating airport association with a larger airline. altitudes lower than, those of a typical jet. NALYSIS A The airport used by an air traveler for the first U.S. DOT enplanement of a commercial air flight. Regional jet
EMAND A jet aircraft with a single aisle designed for Acronym for U.S. Department of Transportation. D seating fewer than 100 passengers. ASSENGER ASSENGER P
FOR MORE INFORMATION, PLEASE CONTACT MEAD & HUNT, INC. ■ 959 REDCEDAR WAY ■ COPPELL, TX 75019 360-600-6112 ■ [email protected] ■ WWW.MEADHUNT.COM
Colorado Springs Comparison
The Northern Colorado Region has many similarities to the Colorado Springs area and a similar proximity to Denver International Airport. Due to the geographical and air service market similarities, it serves as an ideal comparison for air service opportunities.
30-Minute Drive Time Comparison FNL COS Population 608,894 645,400 Median Household $65,621 $62,166 Income Median Home Value $324,591 $300,804 FNL Bachelor's Degree or 39.2% 36.9%
IRPORT Higher A Annual Expenditures on Airline Fares per $558.82 $526.08
EGIONAL Household R Colorado Springs Airport Stats • OLORADO 4 Airlines: AA, DL, F9, UA C • 13 Destinations • Enplanements on the rise
ORTHERN • 2015: 600,000 –N • 2018: 855,000 • 145,000 outbound to DEN ROPOSAL P
Population, Income, Home Value, Education Source: U.S. Census Bureau, Census 2010 Summary File 1. Esri forecasts for
ERVICE 2018. S Expenditures Source: Derived from the 2015 and 2016 Consumer Expenditure Surveys, Bureau of Labor Statistics. Esri. IR A Page 8 ITEM NUMBER: 4 MEETING DATE: December 11, 2019 PREPARED BY: Aaron Ehle, Planning and Business Development Specialist
TITLE Remote Tower Update
RECOMMENDED PDSC ACTION Informational
SUMMARY The Colorado Remote Tower Project is moving forward with phase 1 testing, which is expected to last approximately 3 months, scheduled to begin on January 22nd, 2020. On December 3-4, a safety risk management panel was held to discuss the activation of the mobile air traffic control tower, which will provide air traffic control services during phase 1 testing. Activation of the mobile tower was determined to present a low risk. This was a critical step in the approval process for the mobile tower. It will take several weeks to deploy the mobile tower, install necessary equipment and connections, and train the air traffic controllers. Depending on how long this takes, the phase 1 start date may be at risk. On November 8th, the CDOT Aeronautics Director received a letter from the FAA indicating that the gap between phase 1 and phase 2 testing had inexplicably increased from 2-3 months to 9 months or more. The length of the gap between phase 2 and phase 3 of testing is unknown, but not expected to be as long. The FAA is proposing to deactivate the mobile tower between testing phases for budgetary reasons. This will cause confusion among the pilot community, presenting a risk, and will result in losing a portion of the controller staff. The Airport and CDOT are advocating for continuous air traffic control throughout the testing period in order to enhance safety and allow for the return of commercial air service. Director Licon indicated that the airport would fund the controllers between phases to maintain continuity of air traffic services. The FAA has indicated that they would not support this solution, as the program is considered a research project. Research projects are usually removed after the research period is concluded. In reality, the Colorado Remote Tower Project is a developmental program intended to be certified and placed into service at FNL. This FAA position may be based on the concern that there could be an attempt to make the mobile tower a permanent facility. There are several reasons this could not happen, the major one being the inability of the mobile tower to meet the FAA’s siting requirements. Discussions to resolve this issue are still taking place. If the FAA decides to allow continuous air traffic control services, the Airport will likely have to fund 50% of the estimated $60,000-$70,000 monthly cost of the controllers during testing gaps.
Northern Colorado Regional Airport Planning & Development Subcommittee