AVIATION AND TRANSIT COMMISSION MINUTES
Transcript of 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
Ex is t i ng Serv i ce
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
Ex is t i ng Serv i ce
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
Ex is t i ng Serv i ce
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
Ex is t i ng Serv i ce
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
Ex is t i ng Serv i ce
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
Pr io r i t i z i ng Oppor tun i t i es
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
Pr io r i t i z i ng Oppor tun i t i es
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
Pr io r i t i z i ng Oppor tun i t i es
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
498,631 SEATS WEEKLY
› SFO = 4,409 FLIGHTS AND
691,353 SEATS WEEKLY
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
Ai r l i ne Incen t i ves
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
Ai r l i ne Incen t i ves
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
Ai r l i ne Incen t i ves
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
Ai r l i ne Incen t i ves
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
Phone: (541) 521-5962
Billings Logan International Airport:
Kevin Ploehn, Assistant Director
Phone: (406) 657-8485
Billings Tourism Business
Improvement District:
Steve Wahrlich, Chairman
Phone: (406) 238-1793
Big Sky Economic Development:
Steve Arveschoug, Executive Director
Phone: (406) 256-6871
Billings Chamber of Commerce/
Visit Billings:
John Brewer, CAE, President & CEO
Phone: (406) 869 -3720
Big Sky Economic Development:
Allison Corbyn, Business Recruitment
& Outreach Program Manager
Phone: (406) 869-8420