Application Under the Small Community Air Service Development Program Docket DOT-OST-2020-0231

Application under the Small Community Air Service Development Program Docket DOT-OST-2020-0231

By the Toledo-Lucas County Port Authority For the Eugene F Kranz Toledo Express Airport

Congressional Districts: OH-09 Dun & Bradstreet Number: 51625127 Table of Contents Application under the Small Community Air Service Development Program ...... 1 Executive Summary ...... 3 Our Proposal ...... 3 About Toledo ...... 4 Air Service Overview ...... 5 Catchment Area ...... 5 Existing Air Service ...... 6 Alternative Airports/ Leakage Study ...... 6 Air Fares at Toledo Express Airport ...... 9 Historical Air Service ...... 10 Capacity Reductions Due to Coronavirus ...... 12 Air Service Development Efforts ...... 13 AIR SERVICE NEEDS AND DEFICIENCIES ...... 14 Comparable Communities ...... 14 Why DFW would be a successful route for TOL ...... 14 STRATEGIC PLAN ...... 18 Proposed New Route...... 18 Target Airline Support ...... 18 PROJECT IMPLEMENTATION, MONITORING, AND FUNDING ...... 18 Public / Private Partnerships ...... 18 Project Funding ...... 19 Implementation Timeline ...... 20 Legal Sponsor ...... 20 Success Metrics/Goals ...... 20 Financial Controls ...... 20 Use of Local and Department Funds ...... 20 The Right Choice ...... 21 Appendix: Airline Letter of Support ...... 22 Appendix: Letters of Support ...... 23 Appendix: Standard Form 424 ...... 48 Appendix: Summary Information Sheet ...... 51

2 Executive Summary Toledo Express Airport (TOL) is the primary commercial service airport for the Toledo, OH MSA and surrounding areas. It is served by American Airlines to two major hubs: Chicago O’Hare (ORD) and Charlotte (CLT) and by Allegiant Air to three Florida leisure markets: Orlando (SFB), Punta Gorda (PGD), and St Petersburg (PIE). Industry consolidation over the last 10-15 years has negatively impacted TOL causing leakage to other airports in the region with more service. Ten years ago, there were six flights a day out of TOL and today there are only one to five flights per day depending on the day of week. TOL is the largest MSA in the country served by only one legacy carrier with service to two hubs.

Our proposal is to recruit American Airlines to add service to a third hub, Dallas/Ft. Worth (DFW). This service will not only provide nonstop service to an important business market for Toledo businesses, but it will also connect to American’s global network from DFW providing greatly improved connections in both important business and leisure markets. American fully supports this application for daily service to DFW on regional jets. When American previously started service to CLT in 2017, it quickly became a strong performing market, and we are confident that the same strength will be produced with new service to DFW.

Award of a SCASD grant will give local Toledo residents more air service options and reduce leakage to Detroit (DTW). With increased service and investment from American in the TOL market, other carriers will realize the market potential and be willing to enter (or renter) the market, providing the community with more options and increased competition that will in turn lower fares and lower the leakage to DTW.

We believe that this application is a perfect fit for the SCASD program. TOL is a non-hub airport in a populated region that has suffered significant air service loss since industry consolidation. We have a willing partner in American Airlines to an important hub. Partnering with the SCASD program provides a viable platform for this exciting opportunity!

Our Proposal The Toledo-Lucas County Port Authority is requesting a SCASD grant in the amount of $750,000 as part of a $1.6 million effort to increase retention of Northwest Ohio passengers at Toledo Express Airport (TOL) through new year-round, daily American Airlines service in the Toledo-Dallas/Ft. Worth market. The Department of Transportation’s role would be to support a $1 million minimum revenue guarantee (MRG) with a $750,000 grant. The remaining $250,000 would be financed by JobsOhio and The Toledo-Lucas County Port Authority. The MRG would be supported by $250,000 of cash marketing support and $319,766 of in-kind services from the airport and community.

3 About Toledo Toledo is a city of business, culture, and education, rich in diversity and community. Located in Northwest Ohio, Toledo is situated along Lake Erie and bisected by the Maumee River. More than 601,000 people call the Toledo metropolitan area home, giving the region all the attributes of a large cosmopolitan area, but still retaining the advantages of small-town atmosphere and charm. The Toledo MSA area includes Lucas, Fulton, Wood and Ottawa counties.

Traditionally a manufacturing region, this area is reinventing itself as a leader in technology and research. Capitalizing on the expertise in manufacturing and an experienced and educated workforce, new technologies are emerging enabling the region to become a national leader in solar technology and manufacturing. Utilizing the natural resources available has also led to advancements in wind technology. Northwest Ohio is in a state of reinvention and refocus, which is leading to new economic development opportunities and advancement.

With its rich diversity of people, the Toledo area boasts a nationally recognized zoo, a world-class art museum, a symphony orchestra, opera, ballet, and theater groups, as well as a wide variety of neighborhood and ethnic festivals. An abundance of outdoor recreation and sports, including the Metroparks system, is also available on the area’s lakes and rivers. With its close proximity to the Lake Erie Islands and Cedar Point, Toledo is a natural destination point for summer recreation. Toledo is also home to the Mud Hens Triple A minor league baseball team and the annual LPGA Golf Tournament, the Marathon Classic tournament presented by Owens Corning and Owens-Illinois.

Exceptional educational opportunities are also available. Besides an extensive public school system and private education choices, secondary education opportunities are numerous. There are 33 schools of higher education within 50 miles of Toledo, accounting for one of highest such concentrations in the United States. With an enrollment of nearly 193,000 undergraduate and graduate students in regional universities and colleges, Northwest Ohio offers a comprehensive selection of higher education programs including nationally recognized schools of engineering, pharmacy, education, business, law, and medicine. Some universities to note are Bowling Green State University, The University of Toledo, and Lourdes University.

Toledo is a crossroads community with big- city amenities with the convenience and appeal of a small town. National recognition for icons such as Jeep, Mud Hens and Tony Packo’s hot dogs; natural resources such as Lake Erie, the Maumee River and area Metroparks; and attractions such as the Toledo Zoo and the Toledo Museum of Art give Toledo its identity. Toledo is a highly desirable place to call home, for a day…or a lifetime.

4 Air Service Overview

Catchment Area TOL is the primary commercial air service airport serving northwest Ohio and southeast Michigan. The Toledo MSA is 602,000 people and when considering primary and secondary regions are home to over 840,000 people, which is a very large region with very little air service. TOL is underserved, especially when compared to peer airports.

5 Existing Air Service TOL current air service consists of only one network carrier, American Airlines, and one Ultra Low-Cost Carrier (ULCC), Allegiant. American offers daily service to Chicago O’Hare (ORD) on Thursday through Monday and twice daily service on Monday, Thursday, Friday and Sunday and once daily Tuesday, Wednesday, Saturday to Charlotte (CLT). Allegiant serves Orlando/Sanford (SFB), St Petersburg/Clearwater (PIE) and Punta Gorda (PGD) with less than daily flights. A previously successful SCASD grant was used to attract American to serve CLT in 2011 and that market has proved successful ever since the launch in 2017.

Alternative Airports/ Leakage Study Largely due to lack of service, air passengers in Toledo are choosing to depart from nearby airports instead of TOL. This problem for the community could be lessened through additional air service to/from TOL.

Only 10% of all air passengers in the Toledo Primary Territory use TOL. This equates to ~570 passengers daily each way (PDEW) that should be using TOL but instead are choosing to depart from another airport. 79% of passengers in this territory are using nearby DTW.

Likewise, only 27% of air passengers in the Toledo Secondary Territory use TOL while the majority also use nearby DTW.

With the Toledo Primary and Secondary Territories making up 70% of all TOL traffic, the airport is working to improve traffic

6 retention in these regions. However, the biggest reason for leakage is lack of service and can only be lessened through additional service.

7 Our goal for the new service to DFW after two years would be to see retention rates similar to the proxy market CLT of 70-80%. This would be an increase of 56 percentage points, which could result in an additional 7,500+ passengers a year using TOL. This would drive incremental non-aeronautical and aeronautical revenue to the local economy.

Of the top 15 leaked markets from TOL, over half of them are to the west or southwest regions. DFW is ranked 11th with 25.4 people leaking daily to other airports. New nonstop service to DFW will not only decrease DFW leakage but leakage to many southwest/west coast markets as well as better connect opportunities and lower fares will exist.

Today, TOL experiences a high amount of leakage, which is inconvenient for the residents of TOL and nearby communities. TOL residents are also forced to travel in difficult driving conditions in the winter months to get to DTW and other surrounding airports. Adding additional service is the best way to decrease leakage, make traveling safer, and improve air service options for Toledo and its residents.

8 Air Fares at Toledo Express Airport As a result of dwindling service over the past 16 years, TOL now suffers from high fares (in non-Allegiant routes). The TOL average fare is 11% higher than the US average when Allegiant is excluded.

While the overall TOL domestic average fare for calendar year 2019 was 20% below the US domestic average, 75% of markets (15 of the top 20 connect markets) have higher fares than the US average. With Allegiant having such a strong presence in TOL, the average fare has come down considerably but not in markets outside of their leisure routes. In markets like Los Angeles (LAX) and Seattle (SEA), fares are over 50% higher than the US average.

DFW is 25% above the US average. With the award of the SCASD grant to commence new service to DFW, fares to not only DFW but other western markets like LAX should decrease and be more in-line with domestic averages.

9 Historical Air Service Industry consolidation has been particularly hard on TOL. In 2004, TOL had service from five legacy carriers to six hubs. American, ATA, Continental, Northwest, Delta and US Airways served Atlanta (ATL), Chicago (MDW and ORD), Cincinnati (CVG), Detroit (DTW) and Pittsburgh (PIT).

Today, TOL only has one legacy carrier with service to two hubs and one ULCC with less than daily service to three Florida markets, which is a flight reduction of 87% since 2004. The result of less competition is high fares and high leakage to neighboring airports that offer more service.

Service changes over the last 10 years have also been unkind to TOL. Over the last 10 years, TOL has lost service from two legacy carriers, Delta and Northwest, to both DTW and Minneapolis (MSP).

Despite losing a lot of service, TOL has seen some new market entrants that have been incredibly successful. On average, new markets have stimulated traffic 300%, proving the untapped demand potential that exists at TOL. American Airlines service to CLT stimulated demand 672%! Even more impressive was Allegiant when they launched new service to PGD in 2013 and stimulated demand 4,000%! Additional new service to DFW will be just as successful as these new markets.

11 Capacity Reductions Due to Coronavirus The Coronavirus pandemic has crippled the aviation industry over the past year. Airlines have had to cut capacity and suspend routes in order to survive. Airports are struggling to keep service and get travelers to fly and TOL is no exception. With only five routes, TOL cannot afford to lose a single frequency. In March 2021, American Airlines will only have one single flight to ORD for the entire month. They are suspending service to ORD in March due to the pandemic.

March is not the only month affected. Almost all markets have been greatly affected since April 2020. Even strong leisure markets that Allegiant serves to Florida have seen capacity reductions over the past year. The biggest impact though has been on American’s ORD route. This is a highly business traffic focused route and with little to no business travel occurring, American has taken drastic cuts to ORD across the board. The American ORD hub is down in capacity 49% year over year for March 2021. What is left for TOL is only two flights per day to CLT on American for the residents in Northwest Ohio to get to any of their destinations. Without ORD, there are 28 connecting destinations that are no longer accessible from TOL. This will force residents to have to drive to a nearby airport to have access to their desired destinations.

With the addition of service to DFW on American, northwest Ohio residents will have another option to get to connecting points across the country and the world. As the vaccine continues to roll out, travelers will come back and the new DFW route will provide Toledo travelers with much needed access to American’s global route network that has been diminished due to the pandemic.

12 Air Service Development Efforts The Toledo-Lucas County Port Authority continually provides advertising support for airlines that operate out of TOL. On average, the Port Authority spends approximately $170,000 annually on airport advertising efforts, which includes airline promotion in local and surrounding markets. In addition to paid traditional advertising, the Port Authority also promotes airlines and the airport on various social media platforms including Facebook, Twitter, Instagram, and Pinterest, which have seen a combined total increase of over 10 percent in followers from 2018 to 2020. The Port Authority also distributes dozens of e- newsletters to its over 10,000 subscribers to promote airlines and the airport as well. Additionally, the Port Authority continually promotes the airlines that operate out of TOL through ticket giveaway contests, sweepstakes and by donating airline tickets to local nonprofits for auctions, averaging over 65 roundtrip airline tickets per year. These efforts have helped drive the airport’s seven consecutive year-over-year increases in passenger traffic at TOL through 2019.

When American Airlines announced it would begin roundtrip air service from TOL to CLT, the Port Authority provided $250,000 solely to promote the new route over a two-year period. This marketing campaign proved to be successful as load factors on the new route exceeded expectations and after less than a year in operation, American Airlines announced it would be adding a larger aircraft to service the new route.

The year 2020 presented many challenges, which resulted in the Port Authority having to adapt the airport’s marketing plan. Working under COVID-19 restrictions, while considering passengers’ travel hesitations, the Port Authority proactively hosted an online survey available to TOL’s customer base to assist in developing a creative and strategic communication plan to continue to promote TOL during this unprecedented time.

The Port Authority has also been aggressive in offering very competitive air service incentive plans. Costs are low compared to other airports of similar size. The Port Authority has created a comprehensive package of airport incentives to offer carriers that initiate new service at the airport. The package includes waived airport fees, marketing assistance, and marketing professionals to be employed by the Authority. In August 2017, American Airlines commenced service to CLT with help from the previous SCASD grant award. No other new service has started since 2011.

The Authority also works with Ailevon Pacific Aviation Consulting to perform comprehensive analyses for TOL and to conduct meetings with airlines to promote potential new air service to TOL. These analyses are

13 ongoing while airline meetings at their headquarters and at industry conferences occur multiple times per year. Below is a recap of air service development happenings over the last three years.

AIR SERVICE NEEDS AND DEFICIENCIES

Comparable Communities

When TOL is compared to it’s regional peers, it has the lowest seats per capita at 0.25. This means that based on the size of Toledo’s population, the current seats available in the region are severely limited and should be significantly higher. Both Ft Wayne and Dayton have seats per capita ratios greater than one, which is a goal that Toledo is striving to reach. TOL is underserved!

Why DFW would be a successful route for TOL Toledo is a mid-sized market with a strong metro GDP and out of all the domestic markets without service to DFW, TOL is the closest to DFW at 942 miles. This is well within range for comfortable service on a regional jet and would not take up much aircraft time to do a roundtrip.

Toledo is unique in the fact that for its size, it only has one legacy carrier offering service. When you compare TOL to other US markets with one legacy carrier that has service to two hubs, TOL is the only market of its size. Except for Manhattan, KS, the rest of the markets listed are Essential Air Service markets that receive subsidies to fly. Toledo is four and a half times the size of Manhattan and should have more service to offer its large population.

There are many business connections between Toledo and Texas that would benefit greatly from new nonstop service to Dallas from Toledo.

DFW has 88 unique markets that both CLT and ORD don’t currently offer. Top markets include Tokyo (NRT), McAllen, TX (MFE), Fresno, CA (FAT), Ontario, CA (ONT) and Corpus Christi (CRP). Offering a nonstop to DFW would open up these markets to Northwest Ohio travelers and the PDEW would significantly rise in many of these markets. Especially for the business travelers in the businesses listed above!

Due to the large size of Toledo, the underserved ratio of seats per capita, the leakage to DTW, proven historical stimulation when new service starts, the business connections in Texas, and the previous success of CLT by American Airlines, we are confident that if awarded the SCASD grant for DFW, American would begin service, and it would be a resounding success!

17 STRATEGIC PLAN

Proposed New Route The Toledo-Lucas County Port Authority is proposing a Small Community Air Service grant to support a $1 million minimum revenue guarantee for service to Dallas/Ft. Worth on American Airlines. The proposed service would provide Toledo with service to a major hub with a large base of traffic and enable connections throughout the southwest and western United States and also to Central and South America. This new market would also help TOL retain passengers that are currently leaking to DTW and other nearby markets due to nonstop options, lower fares, or better connections. DFW is the largest unserved market for TOL.

Target Airline Support American Airlines has expressed support in operating the proposed service from Toledo to Dallas/Ft. Worth. With the support of a minimum revenue guarantee, an air service awareness marketing campaign and fee waivers, American Airlines believes that this would give them a compelling reason to start the route by the end of 2021.

PROJECT IMPLEMENTATION, MONITORING, AND FUNDING The community cash contribution amounts to $250,000. The Toledo-Lucas County Port Authority will also contribute $250,000 in marketing funding consistent with D.O.T. guidelines and $160,892 in airport fee waivers. Public / Private Partnerships The following public and private companies and members of government have written letters of support in favor of new service on American Airlines to Dallas/Ft. Worth.

18 Project Funding The Toledo community is requesting a SCASD grant for $750,000 to support a $1 million minimum revenue guarantee (MRG). The remaining $250,000 will be supported by JobsOhio and the Toledo- Lucas County Port Authority. The MRG will be available to American Airlines for a period of two years from the start of service. In addition to the MRG, TOL will provide $250,000 in cash marketing to support American. American will also receive $319,766 worth of in-kind support. This includes waived airport fees and additional marketing support from media outlets in the community. Minimum Airport Marketing Marketing Funding Use Revenue Fee Total Support Support Guarantee Waivers Funding Type Cash Cash In-Kind In-Kind Combination Department of $750,000 $750,000 Transportation

JobsOhio $125,000 $125,000

Toledo-Lucas County Port Authority and $125,000 $250,000 $160,892 $535,892 Toledo Express Airport Various Media $158,874 $158,874 Partners Total $1,000,000 $250,000 $158,874 $160,892 $1,569,766

Assuming that the DFW-TOL route will be on a CRJ-900, which DFW-TOL 1 Daily Flight has 76 seats in a two-class configuration and that load factor CR-9 (2-Class 76 seater) Year 1 Year 2 in year one will be 70% and year two will be 75%, the Load Factor 70% 75% following is a breakdown of what TOL will pay to American. Seats per Flt 53 57 Payment per Pax $4 $4 Year Total $77,672 $83,220 2 Year Total to AA $160,892

19 Implementation Timeline The Toledo-Lucas Port Authority is ready to implement this program immediately upon agreement with American Airlines. Ongoing discussions and meetings are occurring with American. We believe service could begin towards the end of 2021. Legal Sponsor The Toledo-Lucas County Port Authority, operator of the Toledo Express Airport, will be the legal sponsor responsible for the implementation and administration of this program. Success Metrics/Goals Success will be based on the following goals:  Reduce the average fare to DFW by 5%  Increase the market retention rate of DFW from 13.5% to 70% after the first 2 years of service  Showcase the TOL airport as a great option for both airlines and travelers so that other legacy carriers will re-enter the market because of the success of DFW and CLT The airport reviews traffic and revenue data monthly on airline and route performance and is in close communication with the airline network planners to ensure the flight times, aircraft and day of week service are all aligned for optimal performance. A leakage study will likely occur after the proposed market has been in service at least one to two years to measure and ensure that the goals have been met. Financial Controls The Toledo-Lucas County Port Authority will be responsible for all fiscal matters related to the grant as well as the Department’s reporting requirements. Use of Local and Department Funds The Port Authority, as the designated legal sponsor, will ensure that both Department and local funds associated with this project are expended in a manner consistent with the SCASD grant intention and the contract between the Department and the TOL airport.

20 The Right Choice Our application meets most of the Priority Selection Criteria set out in the solicitation.

1. Air fares are higher than the national average air fares for all communities. ✓ When excluding Allegiant, TOL air fares are 11% higher than the national average. 2. The community or consortium will provide a portion of the cost of the activity from local sources other than airport revenue sources. ✓ Community agencies are contributing a 109% match ($819,766) of our grant request amount of $750,000. 3. The community or consortium has established or will establish a public-private partnership to facilitate air carrier service to the public. ✓ The $408,874 budget for promoting the new airline service will be administered by the Toledo- Lucas County Port Authority. 4. The assistance will provide material benefits to a broad segment of the traveling public, including businesses, educational institutions, and other enterprises, whose access to the national air transportation system is limited. ✓ The northwest Ohio region has been underserved for the last 16 years. As a result, local travelers are forced to drive to DTW and other airports, often in dangerous winter conditions. This grant will bring more options to the region as well as help lower airport unit costs, thereby making the airport more attractive for further growth. 5. The assistance will be used in a timely manner. ✓ This project has been coordinated with our partner carrier, American Airlines. We anticipate that we could be able to implement new service as early as Winter 2021. 6. The assistance will be used to help restore scheduled passenger air service that has been reduced or suspended as a result of the 2020 Coronavirus pandemic. ✓ In March 2021, American has suspended service to ORD where they previously had three flights per day. This leaves only two flights per day to CLT and three non-daily Allegiant Florida routes. New service to DFW could help offset the huge capacity cuts from the ORD suspension and give travelers another option besides driving to another airport.

21 Appendix: Airline Letter of Support

22 Appendix: Letters of Support

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47 Appendix: Summary Information Sheet