THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN April 2010 Prepared By: Landrum & Brown FIRM PROJECT ROLE Landrum & Brown Project Management and Oversight, Strategic Vision, Air Cargo, Airport Operations and Land Utilization Colliers Land Utilization and Commercial Development Indiana Strategic Resource Group Business, Community, and Political Issues RLM Associates Commercial Passenger and General Aviation Uses Unison Consulting Finance and Governance Issues THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL ACKNOWLEDGMENTS The Landrum & Brown Team would like to formally thank the following stakeholders for their guidance and participation in the conduct and development of this report: The Honorable Rudy Clay, Mayor Gary/Chicago International Airport Board and Management Northwest Indiana Regional Development Authority In addition, we would like to express our appreciation to all those individuals, organizations, and businesses listed in Appendix K whose candor and willingness to participate in the process was so valuable. Landrum & Brown i April 2010 THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL TABLE OF CONTENTS CHAPTER PAGE ACKNOWLEDGMENTS ................................................................................... i ACRONYMS .................................................................................. Acronyms-i EXECUTIVE SUMMARY ........................................................................Intro-1 I. RECOMMENDATIONS ......................................................................... I-1 II. NEXT STEPS...................................................................................... II-1 III. BACKGROUND AND FINDINGS ........................................................ III-1 Section III-1 - Aviation Business Development Section III-1A Analysis of Airline Industry Trends of Fundamental Importance to Gary ........................ III-2 Section III-1B Feasibility of Scheduled Passenger Services at Gary .. III-7 Section III-1C Feasibility of Low Frequency Scheduled and Charter Services .............................................. III-16 Section III-1D Feasibility for Corporate/General Aviation Service .... III-21 Section III-1E Feasibility of Air Cargo and Logistics ...................... III-32 Section III-1F Maintenance and Other Supporting Services ........... III-42 Section III-1G Alternative Aviation Uses ..................................... III-46 Section III-2 - Land Utilization ................................................. III-49 Section III-2A Airport Property and Operating Requirements ......... III-49 Section III-2B Collateral Land Development Opportunities ............. III-66 Section III-3 - Finance Considerations ...................................... III-79 Section III-4 - Governance ....................................................... III-92 Section III-5 - Business and Community ................................... III-98 Section III-5A Gary, Indiana History .......................................... III-98 Section III-5B Historical Sequence of Events ............................... III-99 Section III-5C Local and County Taxes ..................................... III-105 Section III-5D Interview Findings ............................................ III-107 Landrum & Brown TOC - i April 2010 THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL TABLE OF CONTENTS, (CONTINUED) APPENDIX PAGE Appendix A: Strengths – Weakness - Opportunities - Threats ........................ A-1 Appendix B: Airline Industry Trends of Peripheral Importance To Gary ............ B-1 Appendix C: Statistical Analysis of Northwest Indiana Scheduled Traffic .......... C-1 Appendix D: Passengers on Domestic Low Frequency Scheduled ....................D-1 and Charter Services Appendix E: Passengers on International Low Cost Carrier and ...................... E-1 Charter Travel from Chicago Appendix F: Area Business Profile, Within Theoretical F-1 10-Minute Drive of Site Appendix G: Demographic Profile Within Theoretical ....................................G-1 10 and 20-Minute Drive Time of Site Appendix H: Labor Market Characteristics, .................................................H-1 Gary Metropolitan Division Appendix I: Employment Profile, Gary Metropolitan Division .......................... I-I Appendix J: Retail Buying Profile Within Theoretical .....................................J-1 10 and 20-Minute Drive Time of Site Appendix K: Interviews and Contacts ......................................................... K-1 LIST OF EXHIBITS EXHIBIT PAGE III-1 Traffic Potential for the Gary Airport................................................ III-8 III-2 Passenger Traffic at Stewart Airport and Palmdale............................III-10 III-3 Passenger Traffic at Gary..............................................................III-10 III-4 On-Time Performance at 31 Largest Airports ...................................III-11 III-5 The South Shore Line...................................................................III-14 III-6 Estimated Low Frequency Scheduled and Air Charter ........................III-17 Activity at Midway and O’Hare – Enplaned and Deplaned Passengers III-7 Allegiant Airlines Passengers, Rockford and South Bend ....................III-18 III-8 General and Corporate Aviation at Gary..........................................III-22 III-9 General Aviation at Chicago Regional Airports .................................III-23 III-10 Based General Aviation Aircraft at Chicago Regional Airports .............III-24 III-11 Corporate Offices and Airports in Greater Chicago ............................III-25 III-12 Number of Corporate Aircraft by Airport Nearest to Place of...............III-27 Registration III-13 Crosswind Runway Analysis ..........................................................III-56 III-14 Railroad Relocation Options...........................................................III-60 III-15 Potential Areas for Development....................................................III-64 Landrum & Brown TOC - ii April 2010 THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL LIST OF EXHIBITS, (continued) EXHIBIT PAGE III-16 Regional Target Prioritization.........................................................III-73 III-17 Organizational Relationships .........................................................III-80 III-18 Financial Relationships – 2008 Actual .............................................III-81 III-19 Summary of Qualification Requirements for Airport ..........................III-96 Authority Membership in Selected States III-20 Key Regional Connections........................................................... III-108 LIST OF FIGURES FIGURE PAGE III-1 Gary-Chicago Airport 10 – (red), 20- (green) and 45-minute .......... III-66 (blue) drive time areas) III-2 Gary-Chicago Airport 10 – (red) and 20-minute (green)................. III-67 drive time areas) III-3 GYY and immediate (10-minute) draw area (red) .......................... III-67 LIST OF TABLES TABLE PAGE III-1 Gary/Chicago International Airport – Income Statement ...................III-84 III-2 2009 Rates and Charges...............................................................III-87 III-3 Capital Improvement Program – Gary/Chicago ................................III-89 International Airport – FY 2010-2014 III-4 Gary International Airport – Survey Results of General .....................III-90 Aviation and Non-Hub Airports, Comparison of Director Salary, Staffing and Annual Operating Expense Landrum & Brown TOC - iii April 2010 THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL ACRONYMS AIP Airport Improvement Program ALP Airport Layout Plan AOA Airport Operations Area ARFF Aircraft Rescue and Firefighting BLS Bureau of Labor Statistics CGRAA Chicago/Gary Regional Airport Authority (Board) CN Canadian National Railroad COIT County Option Income Tax DUAB Distressed Units Appeal Board EIS Environmental Impact Statement ERA Economic Revitalization Area EZ Enterprise Zone FBO Fixed Base Operator FTZ Foreign Trade Zone GA General Aviation GCIA or GYY Gary/Chicago International Airport GCIAA Gary/Chicago International Airport Authority (Board) GSE Ground Service Equipment IEDC Indiana Economic Development Corporation ILS Instrument Landing System LOI Letter of Intent LOIT Local Option Income Tax MDW Midway International Airport MRO Maintenance, Repair, and Overhaul ORD Chicago O’Hare International Airport PFC’s Passenger Facility Charges RDA Northwest Indiana Regional Development Authority VLJ Very Light Jet Landrum & Brown Acronyms-i April 2010 THE GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN FINAL GARY/CHICAGO INTERNATIONAL AIRPORT STRATEGIC BUSINESS PLAN EXECUTIVE SUMMARY An operational airport, with infrastructure and facilities in place, represents enormous economic potential for a region provided that the potential can be realized. The Gary/Chicago International Airport is faced with the challenges of a diminishing local commercial market, a struggling regional economy, diminishing revenues, adverse impacts from a modified tax structure, aeronautical infrastructure that cannot meet the operating needs of passenger and cargo carriers, complex negotiations linked to enabling the planned capital program, and a general perception of the City of Gary as a place in which to do business. The Gary/Chicago International Airport (GCIA or GYY) in partnership with the Northwest Indiana