aviation and transit commission minutes

AVIATION AND TRANSIT COMMISSION MINUTES

Tuesday, September 6, 2016 The Aviation and Transit Commission met in the Administration Conference Room at the Billings Logan International Airport on Tuesday, September 6, 2016. Those in attendance included: Aviation and Transit Commission Members City Staff and Guests

Ken Behling, Chair Kevin Ploehn, Director of Aviation & Transit Dan Farmer, Vice Chair Shane Ketterling, Assistant Director of Aviation & Transit Peggie Gaghen Kim Annin, Manager of Construction Engineering Vince Ruegamer Terry Zee Lee Ron Spence Mark Astle CONSTRUCTION TOUR The Commission received a tour of the airfield construction projects, beginning with the new Storm Water Detention Pond D project. Exhibits were provided that reflected what the project entailed. Kim Annin, Manager of Construction Engineering and Facilities Planning, provided the Commission with a description of the project's various components. At the northwest corner of the Airport, the Commission saw the Airport's fire training facility, which now includes a shipping container training facility that the Billings Fire Department has constructed for their training needs. Mr. Ketterling provided an informational explanation of how the facilities are used. The tour then headed to the very west end of the Airport where the Commission was able to observe the construction site for the new large hangar facility that Billings Flying Service is building for its fleet of Chinook helicopters. The tour then stopped at the construction site for the Airport's new Large Hangar General Aviation site. Mr. Annin pointed out that water and sewer had to be routed around the existing Edwards Jet Center hangar and connected to the in ground piping near Gate 29. Mr. Ploehn explained the need for this space to accommodate future requests for larger hangars. The tour concluded and the Commission began the regular meeting. PUBLIC COMMENT PERIOD

Terry Zee Lee, SkyWindWorld, provided a short briefing on the future of the kite exhibit in the baggage claim area. In mid-October, she would like to replace the Lewis and Clark exhibit with the Buffalo exhibit that she will be touring in Europe with for the remainder of September. She would like to hold a reception on October 14 and have the exhibit hang in the Airport Terminal until the end of January, at which point it will move to another location. She said she has had a relationship with the Airport providing various exhibits for 20 years, and that this will be her last event. The Commission thanked her for her efforts. SUMMARY OF AIR SERVICE EVENT Mr. Ploehn provided the Commission with a presentation that was given at a Billings Chamber/Big Sky Economic Development/Billings Logan Airport luncheon event the week before by the Airport's Air Service Consultant, Trina Froehlich of Mead & Hunt. The presentation focused on the realities of the airline industry, the Airport's existing service and how it stacks up against other airports, and the future opportunities for enhancing the existing air service for Billings.

AIRPORT AND TRANSIT ADMINISTRATIVE/OPERATIONS REPORTS

� Mr. Ploehn showed the Commission an architectural rendition by CTA Architects Engineers of the Concourse B remodel work. It showed what the new food and beverage concession and the new bathroom facilities might look like once completed.

� Mr. Ploehn provided an update on what was happening at MET Transit. He mentioned that Jim Perez, Transit Manager, could not attend the Commission meeting as he was at the City Council Work Session for the Planning Department's presentation on the Billings Urban Area Unified Planning Work Program. A complete chapter of the plan is dedicated to Transit, and Jim and staff attended to answer any questions.

� Mr. Ploehn continued with information on ridership. Last year's ridership numbers were down by 3,488 and there was an expectation that with the fare increase that went into effect on July 1, 2016 that MET might see a continued downtrend. However, with the route adjustments that went into effect on August 1, 2016, the monthly ridership was up 145 passengers compared to August of last year.

� Mr. Ploehn reported that in the last five weeks two of MET's coaches had engine failures. Each of the engine rebuilds will cost around $35,000. On the positive side, MET is expecting to receive two more of the smaller buses this month, and the last two new buses should be here in late October. The original two smaller buses received last Spring are now on the streets after a number of warranty repairs, and one in-house fabrication repair that appears to be working quite well.

� Mr. Ploehn also reported that beginning on Wednesday this week, MET staff would be busy as they begin a Federal Transit Administration (FTA) Triannual Audit review. The FTA auditors will be at MET for three days evaluating every aspect of the Transit operations to ensure they are operating according to the FTA's requirements. He pointed out that the last audit, three years ago, resulted in a number of findings, mostly concerning MET's procurement processes. Those should have all been addressed, and hopefully will not be an issue during this audit.

� Mr. Ploehn informed the Commission that on September 16 and 17 MET drivers will be competing in the annual Montana State Bus Roadeo in Butte, Montana. Those that do well at the State level could qualify to go to the national competition.

� Finally, Mr. Ploehn showed the Commission a draft rendition of an ad for MET that was targeting the student pass program. The ad would show up in the Wednesday edition of the Billings Gazette and in the Friday "Enjoy." Additionally, 100,000 ad pop ups would take place on the Gazette's Web page over the next two weeks. Staff is hoping to see an improvement in the student ridership by enhancing the advertising for that service.

ITEMS FROM THE COMMISSION Commissioner Gaghen pointed out how amazed she was at the amount of service the airlines are directing towards Cuba. There being no further business, the meeting was adjourned. KP:mdb cc: Aviation and Transit Commission Chrono City Administrator Mayor City Clerk

AIR SERVICE FORUMPresented by Trina Froehlich, Mead & Hunt, Inc.

August 24, 2016

BILLINGS LOGAN INTERNATIONAL AIRPORT (BIL)

TOPICS

INDUSTRY TRENDS

EXISTING SERVICE

PRIORITIZ ING OPPORTUNITIES

AIRLINE INCENTIVES

QUESTIONS AND DISCUSSION

INDUSTRY TRENDS

AIRLINE PROFIT AND LOSS

I ndus t ry T rends

AIRLINES CONSISTENTLY PROFITABLE SINCE 2010; ~$54 BILLION COMBINED NET INCOME 2010-2015

PROFIT DRIVERS INCLUDE CONSOLIDATION, CAPACITY RESTRAINT, INCREASE IN ANCILLARY REVENUE (E.G. BAG FEES) AND FUEL

PROFITS FOSTER GROWTH (E.G., ADDITIONAL CAPACITY, FLIGHTS, ETC.) VERSUS CONTRACTION IN MARKETS LIKE BIL

4

($50)

($40)

($30)

($20)

($10)

$0

$10

$20

$30

Air

line

net

inco

me

(Bill

ion

s)

Cumulative profit since 1990

Source: Diio Mi, Form 41 Net Income (All Airlines, Total System)

Alaska25%

JetBlue23%

Spirit14%

Frontier10%

Hawaiian8%

Allegiant7%

Virgin6%

Sun Country1%

All Others

6%

American24%

Delta21%

Southwest21%

United16%

Other18%

U.S. DOMESTIC OLIGOPOLY

I ndus t ry T rends

PRIMARY OPPORTUNITY FOR GROWTH AT BIL WITH THE LARGEST AIRLINES,

SPECIFICALLY AMERICAN AIRLINES, DELTA AIR LINES AND UNITED AIRLINES

5

82% of the market is controlled

by 4 airlines

Only 18% of the market is controlled by

all other carriers

Source: Diio Mi Scheduled Seats for YE June 2016

American

American

American Reno Air

Air Cal

US

Airways

US Airways

Allegheny Piedmont

PSA

America West

TWA

Ozark

Delta

Delta

Delta

Western

Pan Am

National

Northwest

Northwest

Republic

Southwest

AirTran

ValuJet

ATA

ATA

Southwest

Southwest

Muse Air

Morris Air

United

Continental

Continental

People Express

Frontier

United

UnitedPan Am Pacific

INDUSTRY CONSOLIDATION

I ndus t ry T rends

6

Today

Control approximately 82% of U.S. Domestic Market through M&As

Other Notable Defunct

AirlinesBraniff Airways (1982)

Air Florida (1984)

Florida Airlines (1982) Eastern Airlines (1991)

Midway Airlines (1991)

Vanguard (2002)

Hooters Air (2006)

Skybus (2008)

Aloha (2008)Independence Air (2005)

Western Pacific (1998)

CONSOLIDATION HAS LED TO FEWER OPPORTUNITIES FOR BIL TO PURSUE.

LOAD FACTORS HIGH WITH LOWER FUEL PRICES

I ndus t ry T rends

PRICE SPIKE IN 2008 LED TO CAPACITY REDUCTIONS CAUSING LOAD FACTORS TO INCREASE –

BIL CAPACITY DROPPED 10% FROM 2010 TO 2011 AND LOAD FACTOR INCREASED ACCORDINGLY

CAPACITY REMAINS CONSTRAINED WITH DOMESTIC LOAD FACTORS AT ALL-TIME HIGH OF ~85%

DECLINES IN FUEL DRIVING INCREASED PROFITS AND PRESSURE TO REDUCE FARES

7

68%

70%

72%

74%

76%

78%

80%

82%

84%

86%

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Lo

ad F

acto

r

Jet A

per

Gal

lon

Fuel Price Per Gallon Load Factor

Source: Diio Mi T-100 rolling average LFs (LF = RPMs/ASMs)Source: US Energy Information Administration for Gulf Coast Jet Fuel Spot Price Per Gallon through April 2016

FREQUENCY & CAPACITY CHANGES

I ndus t ry T rends

DOMESTIC DEPARTURES DOWN ~5% SINCE JULY 2011, WHILE

SEATS ARE UP ~7% AS INDUSTRY SHIFTS TO LARGER

GAUGE AIRCRAFT WHICH HELPS OFFSET THE

DROP IN FLIGHT DEPARTURES

LCC/ULCCS ARE EXPERIENCING MOST GROWTH BUT

TYPICALLY DON’T OPERATE IN SMALLER MARKETS

AIRLINES GREW INTERNATIONAL SEATS FASTER THAN

DOMESTIC SEATS OVER THE PAST 5 YEARS

EXCLUDING EAS, BIL FLIGHTS DECREASED 20%

WHILE SEATS DECREASED 2% - AVERAGE

AIRCRAFT SIZE INCREASED FROM 79 SEATS

TO 96 SEATS

8

CARRIER

JUL 2016

VS JUL 2011

FLIGHTS SEATS

Domestic Schedule Comparison

American Airlines (2.9%) 4.0%

Delta Air Lines (8.8%) 6.6%

Southwest Airlines (8.4%) 1.0%

United Airlines (19.6%) (6.3%)

Alaska Airlines 31.0% 38.4%

JetBlue Airways 27.5% 28.5%

Spirit Airlines 138.6% 167.8%

Frontier Airlines (42.3%) (7.4%)

Allegiant Air 82.5% 105.1%

Total All Domestic (5.4%) 7.1%

International Schedule Comparison

Total All International 18.7% 28.0%

Source: Diio Mi Schedule (July 2016 versus July 2011); Ranked by July 2016 seats

FLEET CHANGES

I ndus t ry T rends

IN THE PAST 5 YEARS, TYPE OF AIRCRAFT (E.G. TURBOPROP, REGIONAL JET, ETC.) HAS CHANGED SIGNIFICANTLY

› TURBOPROP AIRCRAFT-OPERATED FLIGHTS ARE

DOWN 39%

› REGIONAL JET-OPERATED FLIGHTS ARE DOWN 21%

- LARGEST DECREASE IN THE 30-50 SEAT RANGE

- LARGEST INCREASE IN THE 71-100 SEAT RANGE

› USE OF LARGER NARROW-BODY JETS ARE UP 17% -

MOST GROWTH IN THE NEW LARGER NARROW-BODY

CATEGORY

› AT BIL, EXCLUDING EAS, ALL SIZE

REGIONAL JETS AND TURBOPROPS

DECLINING WITH GROWTH IN NARROW-

BODY JETS

9

AIRCRAFT

TYPE

DEPARTURES

JUL '16 JUL '11 CHANGE

Turboprop (< 30) 47,149 65,287 (28%)

Turboprop (30-50) 19,610 43,099 (55%)

Turboprop (50+) 12,324 21,828 (44%)

Regional jet (30-50) 117,572 191,163 (38%)

Regional jet (51-70) 40,473 37,423 8%

Regional jet (71-100) 38,286 20,934 83%

Narrow-body (70-125) 79,037 100,013 (21%)

Narrow-body (126-160) 259,311 257,914 1%

Narrow-body (> 160) 151,921 59,838 154%

All Turboprops 79,083 130,214 (39%)

All Regional Jets 196,331 249,520 (21%)

All Narrow-body Jets 490,269 417,765 17%

Source: Diio Mi

$125

$135

$145

$155

$165

$175

$185

$195

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013 2014 2015 2016

Average Domestic One-Way Fare

AIRFARES DECREASING IN RECENT QUARTERS

I ndus t ry T rends

AIRFARES UP 24% SINCE YE 4Q 2009 DUE TO ELIMINATION OF UNPROFITABLE ROUTES AND STRICT ADHERENCE TO

CAPACITY CONTROL AND INDUSTRY CONSOLIDATION

2015/2016 DROP IN AIRFARES ATTRIBUTABLE TO LOWER FUEL PRICES› FROM YE 4Q 2014 TO YE 4Q 2015, FARES DROPPED 3%; MEDIUM/LARGE HUB AIRPORTS DROPPED 4% WHILE

NON-HUB/SMALL-HUB AIRPORTS ACTUALLY INCREASED 1%

› LARGEST FARE REDUCTIONS IN LARGER MARKETS WHERE AIRLINES MUST COMPETE WITH LOW-COST AND ULTRA-LOW COST CARRIERS

10

Source: Diio Mi

PILOT SHORTAGE

I ndus t ry T rends

FALLOUT FROM THE FAR PART 117 CHANGES AS A RESULT OF THE COLGAN ACCIDENT IN 2009

› PILOT FATIGUE DETERMINED TO BE CONTRIBUTING

FACTOR IN THE CRASH

› ADJUSTED PILOT REQUIREMENTS FOR PART 121

CARRIERS AND MINIMUM CREW REST REQUIREMENTS

EFFECTIVE AUG 2014

› WILL LIKELY CONTINUE TO BE A PROBLEM FOR 3-5

YEARS INTO THE FUTURE

HAS SPED THE RETIREMENTS OF 50-SEAT REGIONAL JETS AND GROWTH IN SMALLER MAINLINE AIRCRAFT

IMPACTING SOME REGIONAL AIRLINES SIGNIFICANTLY MORE THAN OTHERS

WILL CONTINUE TO IMPACT BIL

› AIRCRAFT OPERATED BY REGIONAL AIRLINES, LIKE

SKYWEST AND CAPE AIR, IMPACTED THE MOST

› BIL SERVICE BEEN IMPACTED WITH REDUCED

FREQUENCY IN SOME MONTHS

11

EXISTING SERVICE

Ex is t i ng Serv i ce

AUGUST IS PEAK MONTH FOR FLIGHTS WHILE JULY WAS PEAK MONTH FOR SEATS

AUGUST 2016 FLIGHTS UP 3% WITH SEATS UP 2% OVER 2015

BZN HAS ONE ADDITIONAL AIRLINE (FRONTIER AIRLINES) AND SEASONAL SERVICE BY

DELTA AIR LINES AND UNITED AIRLINES NOT AVAILABLE AT BIL

13

EXISTING AIR SERVICE

Airline Dest.

Aug 2016 –

Weekly

Flights Seats

9K

GDV 14 126

GGW 14 126

HVR 13 117

OLF 14 126

SDY 28 252

ASPDX 7 532

SEA 21 1,596

DL

MSP 21 2,908

SEA 7 532

SLC 27 2,211

G4

AZA 2 332

LAS 2 332

LAX 2 312

UADEN 28 2,666

ORD 7 350

Total 207 12,518

Source: Diio Mi as of 8/4/16


ON 29 DAILY

DEPARTURES, BIL

CREATES 366

CONNECTIONS TO THE US AND

BEYOND

171 UNIQUE

DOMESTIC

CONNECTIONS

15 UNIQUE

INTERNATIONAL

CONNECTIONS

14

ONE-STOP CONNECTIONS TO THE WORLD

Source: Diio Mi schedule snapshot for Thursday, August 4, 2016;

Note: Cnx. based on low circuity and online cnx. between 30-240 mins.

Where do you want to go?

1.28 1.551.67

2.392.85

2.882.88 3.08

3.41 3.55

5.97

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Flig

hts

per

100

Peo

ple

Sea

ts p

er C

apit

a


BIL’S SEAT PER CAPITA IS ABOVE THE REGIONAL COMPARE MARKET AVERAGE AND ABOVE ALL OTHER

MARKETS EXCEPT SPOKANE, MISSOULA AND BOZEMAN

ANNUALIZED, BIL PRODUCED MORE FLIGHTS PER 100 PEOPLE THAN ALL OTHER REGIONAL COMPARE

MARKETS EXCEPT BOZEMAN WHICH HAD ~ 9% MORE FLIGHTS PER 100 PEOPLE

BIL SERVES MORE NONSTOP DESTINATIONS THAN ALL OTHER REGIONAL COMPARE MARKETS EXCEPT BOISE

15

BENCHMARKING BIL WITH REGIONAL AIRPORTS

Source: Diio Mi – YE 1Q 2016 T-100 flown seats (non-directional averaged, one-way); Woods & Poole Economics, Inc. 2015 MSA Population; *Note: HLN, FCA and BZN are using Micro Statistical Area Population

Average Seats per Capita = 2.84

Flights per

100 People


16

BIL TRAFFIC/CAPACITY TRENDS

CAPACITY AND PASSENGER TRENDS ARE POSITIVE WITH CONSISTENT LOAD FACTORS

45

53

60

68

75

83

90

300,000

350,000

400,000

450,000

500,000

550,000

600,000

2010 2011 2012 2013 2014 2015 2016

Lo

ad f

acto

r %

Cap

acit

y/p

asse

ng

ers

Year Ended

Capacity Passengers Load Factor

Source: Diio Mi T-100 Seats/Onboards 12-month non-directional, one-way rolling average; Note: 2013 data impacted by runway closure for 6 weekends

BIL FARES TRENDING UP OVER LAST 5 YEARS BUT DOWN 2% FOR YE 1Q 2016

BIL FARES CONSISTENTLY BELOW THE AVERAGE ONE-WAY FARE AT BZN BUT HIGHER THAN US AVERAGE


17

FARE COMPARISONS

$125

$145

$165

$185

$205

$225

$245

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012 2013 2014 2015 2016

Ave

rag

e O

ne-

Way

Do

mes

tic

Far

e

Year Ended

U.S. Avg Fare BIL Avg Fare BZN Avg Fare

Source: Diio Mi


FEW TRAVELERS USE ALTERNATE AIRPORTS

90% RETENTION IN A MARKET THE SIZE OF BIL IS NOT TYPICAL, USUALLY MUCH LOWER

ONLY 4% OF BIL TRAVELERS DIVERT TO BZN WHILE

3% OF BZN TRAVELERS DIVERT TO BIL

18

AIRPORT USE

Rank

Origin

Airport

YE 3Q 2014

Pax PDEW %

Domestic

1 BIL 779,812 1,068 90%

2 BZN 34,047 47 4%

3 GTF 13,815 19 2%

4 MSO 8,493 12 1%

5 Other 26,581 36 3%

Subtotal 862,748 1,182 100%

International

1 BIL 33,030 45 93%

2 BZN 1,210 2 3%

3 GTF 377 1 1%

4 MSO 277 0 1%

5 Other 664 1 2%

Subtotal 35,558 49 100%

Domestic and International

1 BIL 812,842 1,113 90%

2 BZN 35,257 48 4%

3 GTF 14,192 19 2%

4 MSO 8,770 12 1%

5 Other 27,245 37 3%

Total 898,306 1,231 100%

Source: BIL True Market Estimate YE 3Q 2014Note: PDEW = passengers daily each way

BIL90%

BZN4%

GTF2%

MSO1%

Other3%

PRIORITIZING OPPORTUNITIES

POINT-TO-POINT SERVICE

Pr io r i t i z i ng Oppor tun i t i es

BUSINESS DESTINATIONS

› ONLY MAJOR METRO AREAS HAVE SUFFICIENT

PASSENGERS TO SUPPORT POINT-TO-POINT SERVICE TO

BUSINESS MARKETS

› MANY COMMUNITIES WANT SERVICE TO MAJOR BUSINESS

CENTERS BUT CAN’T SUPPORT IT – NEED CONNECTIONS

LEISURE DESTINATIONS

› ALLEGIANT PROVIDES AZA/LAS/LAX (SEASONAL) –

PREVIOUSLY OAK

› ULTRA-LOW COST CARRIERS CAN GENERATE

SIGNIFICANT NEW DEMAND

› FREQUENTLY LESS THAN DAILY SERVICE

› PROXIMITY TO OTHER AIRPORTS WITH SIMILAR SERVICE

› LIMITED USE FOR THE BUSINESS COMMUNITY

20

DETERMINING HUB SERVICE


PASSENGER POTENTIAL

› LOCAL MARKET SIZE

› HOW MANY PASSENGERS CAN FLOW OVER THE HUB

TYPE OF AIRCRAFT SERVING THE HUB

› DOES THE AIRCRAFT FIT YOUR MARKET SIZE

› AIRCRAFT RANGE

(EX. BIL-DFW 1,080 MILES)

AIRLINE HUB GROWTH/SHRINKAGE

AIRLINE STRATEGY

› WILL NEW SERVICE OVERFLY AN EXISTING HUB ON THE

SAME AIRLINE

› WILL THEY PULL TRAFFIC OFF EXISTING SERVICE

21

SJC

POTENTIAL NONSTOP MARKETS


BIL MARKET SIZE/DEMAND, DISTANCE TO THE HUB AND AIRLINE STRATEGY ARE ALL FACTORS IN DETERMINING TOP OPPORTUNITIES

DFW OFFERS EXCELLENT NEW EASTBOUND AND INTERNATIONAL CONNECTING OPPORTUNITIES FOR BIL TRAVELERS

22

SEA

PDX

SLC

LAX

SFO

RNO

LAS

COS

DEN

MCI STL

BNA

RDU

MCO

DAY

CMH

PIT

BOSMSP

MKE DTW

CLE

CVG

ATL

CLT

IAD

BWI

PHL LGA

MEM

Current hub

Former hub

DALDFW

MDW

ORD

HOU

IAH

JFKEWR

FLL

MIA

AZAPHX

Point-to-point market

SFB

Rank Airport

Reported

Pax

Retention

%

True

Market Diversion

1 Denver, CO 56,915 87% 65,622 8,707

2 Seattle, WA 53,407 89% 59,718 6,311

3 Las Vegas, NV 55,752 95% 56,893 1,141

4 Phoenix, AZ (AZA) 35,596 100% 35,596 0

5 Portland, OR 32,183 95% 33,974 1,791

6 Los Angeles, CA 26,305 94% 27,518 1,214

7 Minneapolis, MN 23,606 93% 25,254 1,648

8 Phoenix, AZ (PHX) 18,420 96% 19,202 781

9 Salt Lake City, UT 16,503 87% 18,873 2,370

10 Sidney, MT 18,013 100% 18,013 0

11 San Francisco, CA 14,901 88% 16,889 1,989

12 Dallas, TX (DFW) 13,160 79% 16,604 3,44413 Houston, TX (IAH) 13,929 88% 15,865 1,936

14 Atlanta, GA 12,236 92% 13,288 1,053

15 Orlando, FL (MCO) 11,646 93% 12,558 911

16 Chicago, IL (ORD) 11,454 94% 12,191 736

17 Anchorage, AK 9,825 85% 11,506 1,682

18 New York, NY (LGA) 9,067 79% 11,458 2,391

19 Orange County, CA 10,829 99% 10,929 100

20 Washington, DC (DCA) 6,303 60% 10,528 4,224

Total 812,842 90% 898,306 85,464


EXCEPT FOR PHX AND SFO,

DFW IS THE LARGEST

MARKET WITHOUT

NONSTOP SERVICE

DFW OFFERS BETTER

DIRECTIONAL CONNECTING

OPPORTUNITIES THAN

EITHER PHX OR SFO

› DFW = 6,511 FLIGHTS AND

790,950 SEATS WEEKLY

› PHX = 3,673 FLIGHTS AND


› SFO = 4,409 FLIGHTS AND


23

TOP TRUE MARKETS

Source: BIL True Market Estimate YE 3Q 2014

NOTE: DIVERSION = TRAVELERS USING AN ALTERNATE AIRPORT OTHER THAN BIL

AIRLINE INCENTIVES

INCENTIVES OVERVIEW

Ai r l i ne Incen t i ves

MOST NEW SERVICE WILL REQUIRE INCENTIVES

› COUNTER BARRIERS TO ENTRY

› COMPETITION HAS INCREASED DUE TO FEWER AIRLINES

AND HUBS

› THE HIGHER THE PERCEIVED RISK THE HIGHER THE

INCENTIVE PACKAGE, LIKELY INCLUDING A

MINIMUM REVENUE GUARANTEE

INCENTIVES TYPICALLY INCLUDE MARKETING, FEE WAIVERS, REVENUE

GUARANTEES, ETC.

› MARKETING AND FEE WAIVERS EXPECTED

› REVENUE GUARANTEES STANDARD FOR SMALL-HUB AND NON-HUB MARKETS,

LIKE BIL

MUST BE ABLE TO DELIVER ON THE OFFER TO THE AIRLINE

25

Revenue guarantee =

# 1 priority for most airlines

TYPICAL ISSUES AND BARRIERS-TO-ENTRY


FINANCIAL RISK - HIGHER OPERATING COSTS

COMPETITION FROM LARGER/OTHER

AIRPORTS – LOW-FARE SERVICE

FREQUENT FLYER PROGRAMS

EXISTING TRAVEL HABITS

NAME AND/OR SERVICE AWARENESS

6-12 MONTH MARKET MATURATION PERIOD

26

Promote long-term success

Reduce market maturation period

Influence airline decision

DIFFERENT INCENTIVES/DIFFERENT PURPOSES


REVENUE GUARANTEE

FEE ABATEMENT

FACILITY UPGRADES

GROUND SUPPORT EQUIPMENT

MARKETING SUPPORT

AIRLINE TRAVEL BANK® (ATB)

27

BIL INCENTIVE PROGRAM OFFERS A REVENUE GUARANTEE,

FEE ABATEMENT AND MARKETING SUPPORT.

FINANCIAL RISK

SERVICE AWARENESS

EXISTING TRAVEL HABITS

FREQUENT FLYER BASE

EXAMPLES OF INCENTIVE PROGRAMS


THROUGH THE SCASDP GRANT AND COMMUNITY PARTNERS, BIL HAS A VERY COMPETITIVE INCENTIVE

PROGRAM TO OFFER AMERICAN AIRLINES FOR DFW SERVICE.

SERVICE NOT GUARANTEED DUE TO SIGNIFICANT COMPETITION FROM OTHER COMMUNITIES.

28

Community Roswell, NM Redmond, OR Bozeman, MT

Airline and destination AA – PHX AA-PHX AA-DFW

# of trips (equipment) 1 1 1

Start date March 2016 May 2016 May 2016

Revenue Guarantee $1,200,000 $600,000 $1,300,000

Airline Travel Bank - - -

Marketing funds $250,000 $75,000 $305,000

Fee waivers $30,585 $95,000 -

Total $1,480,585 $770,000 $1,605,000

Source: SCASDP Applications

COMMUNITY PARTNERSHIP


AIR SERVICE DEVELOPMENT NEEDS

COMMUNITY PARTNERS TO SUCCEED

› AIRLINES MORE RECEPTIVE TO BUSINESS

COMMUNITY

› BUSINESS APPROACH TO AIR SERVICE

DEVELOPMENT

› COLLABORATION FOR MUTUAL ECONOMIC

BENEFIT

› COMMUNITY BENEFITS FROM IMPROVED

GLOBAL ACCESS

› POOL RESOURCES AND BUYING

POWER

29

THANK YOU!

Mead & Hunt, Inc.:

Trina Froehlich,

Senior Consultant

[email protected]

Phone: (541) 521-5962

Billings Logan International Airport:

Kevin Ploehn, Assistant Director

[email protected]

Phone: (406) 657-8485

Billings Tourism Business

Improvement District:

Steve Wahrlich, Chairman

[email protected]

Phone: (406) 238-1793

Big Sky Economic Development:

Steve Arveschoug, Executive Director

[email protected]

Phone: (406) 256-6871

Billings Chamber of Commerce/

Visit Billings:

John Brewer, CAE, President & CEO

[email protected]

Phone: (406) 869 -3720

Big Sky Economic Development:

Allison Corbyn, Business Recruitment

& Outreach Program Manager

[email protected]

Phone: (406) 869-8420

aviation and transit commission minutes

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