Proposal under the Small Community Air Service Development Program Legal sponsor: City of Redding, California DUNS: 14-315-1335 Contact: Rod Dinger, AAE - Airport Manager Redding Municipal Airport • 6751 Woodrum Circle #200 • Redding, CA 96049 (530) 224-4321 • [email protected]Docket #: DOT-OST-2008-0100 Redding Municipal Airport Redding, California
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Redding Municipal Airport Redding, California · Proposal under the Small Community Air Service Development Program Legal sponsor: City of Redding, California DUNS: 14-315-1335 Contact:
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Proposal under the Small Community
Air Service Development Program
Legal sponsor: City of Redding, California DUNS: 14-315-1335
Contact: Rod Dinger, AAE - Airport Manager
Redding Municipal Airport • 6751 Woodrum Circle #200 • Redding, CA 96049 (530) 224-4321 • [email protected]
Docket #: DOT-OST-2008-0100
Redding Municipal Airport Redding, California
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
Redding is a SCASDP success story.......................................................... 2 Underserved to destinations east of Redding........................................... 2 High airfares overall and to eastern markets............................................ 3 Plan has widespread support and benefit................................................ 3 Well considered plan with airline support................................................ 3
Air Service Environment ......................................................... 4 Serving a large portion of northern California ......................................... 4 Business activity driving population growth and demand for air service... 4 Strong visitor traffic to the area............................................................... 5
Air Service – Existing and Historical....................................... 6 Existing air service ................................................................................... 6 Airfares are high ..................................................................................... 6 Historical air service................................................................................. 7 Past air service development efforts ........................................................ 8
Air Service Deficiencies and Needs ........................................ 9 Underserved market with high demand .................................................. 9 High traffic diversion to Sacramento and San Francisco........................... 9 Circuitous routings to top eastern markets............................................ 10 Unreliable service over San Francisco..................................................... 10 High airfares, overpriced market ........................................................... 10 Correcting eastbound service deficiency................................................ 11
Strategic Plan – Air Service ................................................... 12 Project goals ......................................................................................... 12 Proposed air service .............................................................................. 12 Market analysis ..................................................................................... 13 Peer market comparison ....................................................................... 14 Airline support ...................................................................................... 14 Alternate plan....................................................................................... 14 Prior grant award – compare and contrast ............................................ 15
Strategic Plan – Implementation and Funding.................... 16 Public-private partnership...................................................................... 16 Incentive and support plan.................................................................... 17 Strategic Plan funding........................................................................... 20 Project continuation and sustainability .................................................. 21
Schedule and Monitoring...................................................... 22 Schedule ............................................................................................... 22 Program monitoring.............................................................................. 22
Appendix A. Community Support ........................................ 24 Appendix B. Detailed Market Analysis ................................ 33
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Summary Information
A. Applicant Information: (Check all that apply)
X Not a Consortium
Interstate Consortium
Intrastate Consortium
Community now receives EAS subsidy Community (or Consortium member) previously received a Small Community Grant X If previous recipient, expiration date of grant: September 14, 2006
B. Public/Private Partnerships: (List organization names)
Public Private
1. City of Redding 1. Greater Redding Chamber of Commerce
2. 2. Economic Development Corporation of Shasta County
C. Project Proposal: (Check all that apply)
X Marketing Regional Service Personnel X Launch New Carrier X Travel Bank First Service
Surface Transportation X Secure Additional Carrier
X Revenue Guarantee X New Route Start Up Cost Offset Low Fare Service Study Subsidy Upgrade Aircraft Increase Frequency Service Restoration
Other (specify): __________
D. Existing Landing Aids at Local Airport:
X Full ILS X Published Instrument Approach X Localizer X Outer/Middle Marker X Other (specify): GPS
E. Project Cost:
Federal amount requested $500,000 Total local cash financial contribution $162,000 Airport funds $102,000 Non-Airport funds $60,000 State cash financial contribution $0 Existing funds $0 New funds $162,000 Airport in-kind contribution* $10,000 Other in-kind contribution** $607,500 Total cost of project $1,279,500 * Airline Travel Bank and program administration ** Airline Travel Bank commitments and administration
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Air Service Environment
edding Municipal Airport has the ability to serve a large portion of northern California; however, much of the catchment area is driving to Sacramento or
San Francisco to access air service. This section includes an overview of the
catchment area and the community served by Redding Municipal Airport.
Serving a large portion of
northern California
The Redding Municipal Airport
catchment area, located in the northern tip of California’s Central
Valley, encompasses Shasta County
and portions of Siskiyou, Trinity, Tehama, and Plumas Counties. The
proposed air service at Redding
Municipal Airport would benefit a population in the airport catchment
area exceeding 250,000. The
catchment area includes Red Bluff,
Anderson, Cottonwood, Redding, and rural communities in the
mountainous areas to the north, east,
and west. It is estimated that the catchment area generates 342,000
origin and destination passengers per year.
Exhibit 3.1 shows a map of the Airport’s catchment area.
Business activity driving
population growth and demand
for air service
Fueled by business in-migration from southern
California, jobs in the region have grown 22
percent from 1997 to 2006. For the same 10-year period the population grew 15 percent
and is forecast to jump another 53 percent by
2030.
R This section contains:
• An overview of the
Redding community and
the current air service
environment
Exhibit 3.1 Airport catchment area and proximity to competing airports
Exhibit 3.2 Redding’s employment base
Manu-facturing
4%
Construction7%
Retail/ Wholesale
Trade21%
Services36%
Finance, Ins., & Real Estate
7%
Government16%
Transport, Comm., & Public Util.
5%
Other3%
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Reference the pie chart in Exhibit 3.2, previous page, Redding has a
diverse economic base. The service sector is the largest employer in
Shasta County with retail/wholesale trade and government close
behind. Manufacturing is increasing as the community continues to
recruit manufacturing companies. As more companies have located in
the region the demand for air service that provides a more direct route
to destinations east of Redding has increased.
An air service survey completed in 2006 highlighted this need and
identified the companies in Table 3.1 as having high demand for
eastbound service from Redding. One example, CH2M Hill is a large
architectural and engineering firm that
has approximately 240 employees in
their Redding office and 14,500
employees and 200 offices worldwide.
Its headquarters are in Denver, and the
Redding office has projects in
communities throughout the Southwest
and Central U.S. CH2M Hill is just one
example of the many companies in the
area that need eastbound service.
Strong visitor traffic to the
area
In addition to the diverse and growing
business community, the Redding
region is a magnet for tourists seeking
an outdoor experience. Local
attractions include: Lake Shasta, Mt.
Shasta, Lassen National Park,
Whiskeytown National Recreation Area,
and other outdoor attractions that are
nearby.
Table 3.1 Top employers with eastern travel needs
Employer
Barr Brothers Company Mercy Medical Center
Baskins Forest Products Morpheus Lights
Blue Shield of California Newport Biosystems
Butte Community Bank Premiere Brand Meats
CH2M Hill Record Searchlight
Coca Cola Bottling Co. Risse Racing Technology
Comptech Marine SECO Manufacturing Global Flex
Manufacturing Shasta College
Knauf Insulation Shasta Regional Medical
Lehigh Southwest Cement
Sierra Pacific Industries
Les Schwab Tire Recap Simpson University
Macy’s Skyway Recreation
MariTech Industries Universal Medical Design
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Air Service – Existing and Historical
his section presents information on current and historical air service for
Redding Municipal Airport. The current air service section highlights: service
frequency, direct and connecting destinations offered, available fares, and
equipment types. The historical air service section includes a description of historical
destinations, traffic levels, service providers, and any extenuating factors that might
have affected traffic in the past or that can be expected to influence service needs
in the near to intermediate term. Redding Municipal Airport’s past air service
development efforts are also covered in this section.
Existing air service
Horizon Air and United Express serve Redding
Municipal Airport (Table 4.1). Horizon
operates turboprop aircraft to Los Angeles and
Portland. Fifty percent of the Los Angeles-
bound flights are one-stop over Eureka/Arcata
Airport, and the Portland service originates in
Eureka/Arcata. United operates turboprop
service to San Francisco offering the most
connecting options. The Los Angeles service is
the most limited from a connection standpoint.
Airfares are high
Table 4.2 provides a comparison of average airfares paid to/from
Redding Municipal Airport for the past five years. Redding
Municipal Airport’s average fares were greater than the state,
region, and national averages in each of the five years. The
difference between Redding and the total U.S. grew from $16 in
2003 to $40 in 2007. Redding is an overpriced market relative to
the average U.S. market based on average fare. New eastbound
service will increase capacity, add connecting destinations, and likely
lead to decreases in the average fare.
T
Table 4.1 Current air service
Destination Carrier Aircraft Weekly
departures Weekly Seats
Connecting destinations
LAX Horizon Dash 8 Q400 14* 1,064 22
SFO United EMB 120
34 1,020 67
PDX Horizon Dash 8 Q400
7 532 34
Total 55 2,616 N/A
* Seven of the weekly LAX departures one-stop over Eureka/Arcata
Table 4.2 Average airfares
Average fare paid
Market 2003 2004 2005 2006 2007
Redding $165 $166 $176 $198 $199
California $144 $138 $147 $162 $163
West region $137 $135 $144 $156 $155
Total U.S. $149 $143 $146 $159 $159
This section contains:
• Description of existing air
service
• Synopsis of historical air
service
• Description of air service
development efforts
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Historical air service
Since 2003, Redding Municipal Airport has seen some
improvement in air service. This section discusses historical
air service including destinations, traffic levels, and service
providers and extenuating factors that have affected air
service over time.
Destinations, service providers, and traffic levels
Historically, Redding Municipal Airport offered service to
Portland, San Francisco, Los Angeles, and Las Vegas. The
duration of these services can be seen in Table 4.3. The Las
Vegas twice weekly service was short lived, operating for
about five months. However, the Los Angeles service which
was supported by a 2004 SCASDP grant award has been
successful and continues.
Exhibit 4.1 shows the trend in departures and outbound
seats by year, and Exhibit 4.2 shows the trend in
enplanements and load factor over the five-year period from
2003 through 2007. Overall, departures increased from
2,930 in 2003 to 3,196 in 2007, over 35 percent.
Outbound seats increased by 37 percent for the same
period. This increase in activity has been met with positive
response by air travelers. Enplanements grew from 54,921
in 2003 to 64,478 in 2007, an increase of 17 percent. Load
factors also increased as travelers changed their habits and
used the new air service options increasing from 53 percent
to 71 percent through the period, a very high level
considering that the service offering has predominantly been
operated with turboprop aircraft.
Extenuating factors that have affected air service
Two primary factors have affected air service at Redding
Municipal Airport with the net result being that only 36
percent of catchment area passengers use the local airport.
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Strategic Plan – Air Service
he Air Service Deficiencies and Needs section described in detail the
shortcomings in Redding’s air service. Because there is no eastbound air
service, the Redding market is underserved and overpriced to eastern
destinations. The Strategic Plan – Air Service includes the project goals and plan to
remedy its eastbound service and pricing issues. The plan is supported by solid
research and analysis. Moreover, an alternate plan is identified and a forecast
completed to determine its viability. The plan has the support of Delta Air Lines.
Project goals
The goal of this initiative is to secure service to a hub airport located east of Redding
that provides competitive airfares and connecting opportunities to domestic and
international destinations for Redding’s air travelers.
Proposed air service
There are three hub airports, Salt Lake City, Denver, and Phoenix, that have the
potential to serve Redding’s air service needs to the east. However, considering
stage length, routing, connecting opportunities, and pricing, Delta’s Salt Lake City
hub is the best option to accomplish Redding’s goals. Delta service will meet
Redding’s need for connections to the east (Exhibit 6.1) and provide competitive
pricing. Delta’s 50-seat Canadair Regional Jet 200 aircraft are the right size for the
Redding market. The proposed service plan is for Delta to operate two daily,
Canadair Regional Jet 200 roundtrips between Redding and Salt Lake City.
T This section contains:
• Project goals
• A Strategic Plan for
meeting Redding’s air
service needs and
deficiencies
• Alternate plan to meet
the goals
• Previous grant recipient
with new project and
goals
Redding
318 daily departures104 nonstop destinations10 international destinations
Exhibit 6.1 Proposed air service
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Market analysis
A complete copy of the market analysis and associated
assumptions are included in Appendix B. Reference the forecast
summary shown in Table 6.1, Redding-Salt Lake City service is
forecast to produce a segment profit of $54,617 and a system
profit of $4,941,089 in a mature market. Without question, this is
a very favorable forecast. Importantly, because it is so strong, it
may be a market that can continue to turn a profit in spite of
future increases in fuel costs.
The forecast is for a mature market. However, in new markets it
usually takes several months for the passenger traffic to grow to
the point that the associated revenue equals or exceeds the cost of
operating the service. Table 6.2 assumes Delta will realize 40
percent of the passenger forecast for the first month of service
and that passenger traffic will ramp-up at five percent per month
reaching maturity at the end of the first year of service.
Table 6.3 provides a month by month estimate of the net surplus/loss for the first
year of service. Assuming a 12-month ramp-up, it is estimated that Delta will lose
$520,960 in the first 12 months of service. However, with an Airline Travel Bank®
and marketing campaign, the ramp-up period may be shorter which would reduce
the amount of the revenue guarantee required at the end of the contract period.
Table 6.1 Delta Air Lines' Salt Lake City market analysis
Item Statistical category Mature market 1 Seats per departure 50
2 Segments per day 4
3 Annual segments 1,460
4 Annual available seats 73,000
5 Onboard passengers 53,498
6 Load factor 73%
7 Average fares $273
8 Segment 1 revenue $6,602,980
9 Segment 1 cost $6,548,363
10 Segment 1 profit/loss $54,617
11 Segment margin 1%
12 System revenue $14,613,589
13 System cost $9,672,500
14 System profit/loss $4,941,089
15 System margin 34%
Table 6.2 Service ramp-up/start-up period
Month Seasonality Onboard
pax Ramp-
up
Ramp-up adj.
pax Load factor
May 9.5% 5,078 40.0% 2,031 32.8%
June 9.5% 5,072 45.0% 2,282 38.0%
July 9.6% 5,143 50.0% 2,571 41.5%
August 9.8% 5,222 55.0% 2,872 46.3%
September 8.6% 4,621 60.0% 2,773 46.2%
October 9.0% 4,836 65.0% 3,143 50.7%
November 8.5% 4,551 70.0% 3,186 53.1%
December 8.5% 4,561 75.0% 3,420 55.2%
January 6.3% 3,388 80.0% 2,710 43.7%
February 5.8% 3,104 85.0% 2,638 47.1%
March 7.0% 3,770 90.0% 3,393 54.7%
April 7.8% 4,154 95.0% 3,947 65.8%
Total 100.0% 53,498 N/A 34,967 47.9%
Note: Ramp-up = 40 percent first month increasing 5.0 percent per month
Table 6.3 Net surplus/shortfall
Month Revenue Cost
Net surplus/ shortfall
May $416,111 $821,500 -$405,389
June $467,606 $795,000 -$327,394
July $597,027 $821,500 -$224,473
August $784,543 $821,500 -$36,957
September $757,355 $795,000 -$37,645
October $858,639 $821,500 $37,139
November $870,210 $795,000 $75,210
December $934,314 $821,500 $112,814
January $740,310 $821,500 -$81,190
February $720,611 $742,000 -$21,389
March $926,788 $821,500 $105,288
April $1,078,028 $795,000 $283,028
Total $9,151,540 $9,672,500 -$520,960 Note: Includes introductory sale fares for the first three months of service - 75 percent of full fare first two months; 85 percent third month
Proposal under the Small Community Air Service Development Program City of Redding/Redding Municipal Airport
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Peer market comparison
To further test the viability of Redding-Salt Lake
City service, Redding was compared to other
similar markets in the region that have Delta
Salt Lake City service. Economic and
demographic indicators and other factors
important to air service initiatives are
compared. Redmond, Medford, Yakima, and
Eugene, all successful Delta-Salt Lake City
markets, were compared with Redding (Table
6.4). Redding’s indicators compare well to
these successful Delta markets, and its average
airfares topped the other four markets. Based
on this, Redding-Salt Lake City service fits the
profile of other successful markets in the
region. This supports the favorable output of
the Redding-Salt Lake City forecast.
Airline support
This application and the proposed air service have been reviewed with Delta’s
planning staff. Delta supports this application and reserves its final service decision
pending the outcome of this application and subject to conditions in the airline
industry.
Alternate plan
In the event that the proposed service is not realized, the alternate plan is to solicit
service from a carrier that has a hub at either Denver or Phoenix. The next-best
option for successfully accomplishing the goals of this grant application is to secure
United Airlines’ service to Denver. On the up-side, Denver has more connecting
opportunities than Salt Lake City, but its longer stage-length adds to the segment
operating cost. To evaluate the viability of using Denver as an alternate, Redding