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SUPPORTING LOCAL AIR SERVICE: The Benefits, Rewards & Investment In Your Community KICK-OFF MEETING May 11, 2011 PowerPoint Presentation
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SUPPORTING LOCAL AIR SERVICE: The Benefits, Rewards & Investment In Your Community KICK-OFF MEETING May 11, 2011 . The Benefits. The Benefits of Daily Hub Service. No More Driving to Cleveland or Pittsburgh Use YNG To Go Anywhere Easy Connections To Hundreds of Destinations

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slide1

SUPPORTING LOCAL AIR SERVICE:The Benefits, Rewards & Investment In Your CommunityKICK-OFF MEETINGMay 11, 2011

slide3

The Benefits of Daily Hub Service

  • No More Driving to Cleveland or Pittsburgh
    • Use YNG To Go Anywhere
    • Easy Connections To Hundreds of Destinations
    • Fast Check-In and TSA Processing
    • Shorter Travel Times
    • Increased Convenience
  • Did I Mention No More Driving the Cleveland or Pittsburgh
    • No Long Drives in Snow or Rain
    • Much Easier to Get Someone to Pick You Up
    • Gas is Over $4/Gallon…
  • Cheaper Parking
    • YNG = $30/week
    • CAK, CLE & PIT… much more

Slide

slide4

Where could Delta fly you from YNG?

Served by Air France

Slide

Source: Official Airline Guide Schedules for the week of May 9-15, 2011 (May 2011 American Express SkyGuide)

slide6

What about United?

Served by

South African Airways

Served by SAS

Served by

Austrian

Slide

Source: Official Airline Guide Schedules for the week of May 9-15, 2011 (May 2011 American Express SkyGuide)

slide8

The Rewards of Daily Hub Service

  • Business Travel Becomes Easier
    • Choice of Travel Times @ YNG Provides Greater Flexibility
    • You Can Work On the Plane… You Can’t Work While Driving
    • No More Arriving at CLE 3 Hours Before Your Flight Just to Avoid Traffic
  • Local Economic Development
    • Increased Access to Air Service Attracts New Employers
    • New Employers Hire New Employees
    • Local Businesses Can Grow Faster with Increased Access to Customers Abroad
    • New Jobs Will Be Created at the Airport
  • More Money Stays In the Community
    • Visitors will rent cars at YNG not PIT, CAK or CLE
    • Local Concessioners Will Profit From Passengers (Not the Hudson News or Subway at PIT)
  • You Can Get There From Here
    • Public Perceptions of the Mahoning Valley Will Change When Air Service is Available

Slide

slide10

Closure United’s Cleveland Hub

  • Prediction: Cleveland Hub Will Close
  • Why?
  • Served as a “Relief Valve” to Continental
    • Alternative to Newark (EWR) for passenger flow in/out of the Northeastern United States
  • Strategically Unnecessary to the Merged United/Continental
    • Chicago – O’Hare (ORD): Will handle East-West passenger flow
    • Washington – Dulles (IAD): Will handle North-South passenger flow
  • Airport Facility Not Built for Hub Operations
    • Single runway operations limits growth
    • Terminal facility limits the number of mainline departures per connecting bank
  • More Lucrative Uses of Available Aircraft
    • Merger creates many opportunities for growth in other United hubs requiring the use of aircraft currently being flown in Cleveland.

Slide

slide11

United Airlines’ Cleveland Hub

  • Effects on Youngstown/Warren/Sharon
  • Fewer Nonstop Flight Options
    • Local travelers will need to connect via another hub more often when using CLE
    • CLE becomes a less attractive option for flying
  • YNG No Longer Located Within United’s “Kill Zone”
    • “Kill Zone” comprises a 75 mile radius around any airline hub
    • In recent years United has had no success when starting service to airports located with this zone.
      • Daytona Beach, FL (DAB) – 57 Miles from Orlando Int’l Airport
      • Palmdale, CA (PMD) - 67 Miles from LAX
      • Rockford, IL (RFD) – 75 Miles from O’Hare Airport
      • Stewart/Newburgh, NY (SWF) – 71 Miles from LaGuardia Airport
  • Demand for Daily YNG Air Service Grows
    • Passengers will need to connect via a hub when flying from YNG, CLE or PIT

Slide

slide12

Southwest Airlines’ – AirTran Acquisition

  • Predictions: AirTran’s Akron/Canton Operations Close
  • Southwest Grows Its Cleveland Operation
  • Why?
  • CAK Operations Will No Longer Be Necessary
    • CAK is the Low-Fare Less-Congested Alternative to CLE
    • Southwest will lower fares in CLE and United’s departure will eliminate congestion
  • Split Operations Are Not Cost Efficient
    • Southwest’s lowerfares will cut into United’s bottom line
  • One Man’s Trash Is Another Man’s Treasure
    • Southwest routinely fills voids left by legacy airlines

Slide

slide13

Southwest Airlines’ – AirTran Acquisition

  • Effects on Northeastern Ohio
  • Fares at CLE Will Fall
    • Additional service by Southwest will provide lower fares
  • Alienated CAK Passengers – Where Will They Go?
    • Not every current CAK passenger is willing to drive to CLE for flights
    • New air service options to meet this demand will be introduced, either in CAK or YNG
  • Southwest Will Attract More Leisure Passengers @ CLE
    • Families from Toledo to Youngstown seeking lower fares and nonstop flights to popular leisure destinations will be more likely to choose CLE
  • Southwest Will Attract Fewer Business Passengers @ CLE
    • Without the large assortment of nonstop destinations currently offered by Continental, business travelers will prefer to use the closest airport to their home or business providing a boost to local airports.

Slide

slide15

Youngstown/Warren/Sharon & Allentown/Bethlehem/Easton

Geographically Similar Air Service Markets

CLE

YNG – CLE

77 Miles 1:15 Drive

YNG

EWR

ABE

ABE - EWR

80 Miles 1:33 Drive

YNG – PIT

58 Miles 1:03 Drive

ABE - PHL

75 Miles 1:25 Drive

PIT

PHL

Slide

Source: Driving Directions & Times from Google Maps

slide16

Similar Catchment Areas

Catchment Area

Catchment Area & MSA Overlap

MSA Excluded from Catchment Area

25 mi

25 mi

25 km

25 km

Slide

Source: Air Service Partners 2010 Zip Code Database (based on December 2010 zip code data provided by Datasheer, LLC)

slide17

Similar Populations

Population

Population

YNG MSA Population is:

10.3% Larger

YNG Catchment Population is:

37.7% Smaller

Slide

Source: Air Service Partners 2010 Zip Code Database (based on December 2010 zip code data provided by Datasheer, LLC)

slide18

Personal Purchasing Power Is Similar Too…

Average Personal

Purchasing Power

Average Personal

Purchasing Power

YNG MSA

Personal Purchasing Power is:

1.9% Smaller

YNG Catchment Area

Personal Purchasing Power is:

3.5% Smaller

Slide

Source: Air Service Partners 2010 Zip Code Database (based on December 2010 zip code data provided by Datasheer, LLC) purchasing power - U.S. Census Bureau American Community Survey

slide19

YNG Market Should Be 60% the Size of ABE Today

% of

ABE Market

YNG Population is

37.7% Smaller

(Chart 23)

YNG Personal

Purchasing Power is

3.5% Smaller

(Chart 24)

Slide

slide20

If ABE Can Support This Much Airline Service?

ABE – YYZ 2 Daily Beech-1900 38 seats

Total 2 Daily 38 seats

ABE – MCO 2 Daily 717-200 234 seats

Total 2 Daily 234 seats

ABE – MCO/MYR/PIE 8 Weekly MD-80 150 seats

Total 8 Weekly 150 seats

ABE – ORD 3 Daily EMB-145 150 seats

Total 3 Daily 150 seats

ABE – ATL 2 Daily CRJ-200 100 seats

ABE – DTW 4 Daily CRJ-200 200 seats

Total 6 Daily 300 seats

ABE – CLT 1 Daily A319 124 seats

2 Daily CRJ-200 100 seats

ABE – PHL 1 Daily Dash-8-200 37 seats

2 Daily Dash-8-300 100 seats

2 Daily CRJ-200 100 seats

Total 8 Daily 461 seats

ABE – IAD 4 Daily Saab-340 136 seats

ABE – ORD 4 Daily EMB-145 200 seats

Total 8 Daily 336 seats

Grand Total 30 Daily 1,669 Daily Seats

Slide

Source: Official Airline Guide Schedules for the week of January 10-16, 2011 (American Express SkyGuide – January 2011Edition)

slide22

Top Candidates For Daily Nonstop Hub Service

Detroit

YNG

Chicago

(O’Hare)

Philadelphia

Washington

(Dulles)

Slide

slide23

Hub Service Candidate Airlines

Targeted Hub Frequency Aircraft Daily Seats

Chicago (O’Hare) 3 Daily EMB-145 150 seats

New York (LGA) 1 Daily EMB-145 50 seats

Total 4 Daily 200 seats

Presently Not A High Priority for American Eagle

Detroit 3 Daily CRJ-200 150 seats

Total 3 Daily 150 seats

Discussions Continue

Philadelphia 2 Daily CRJ-200 100 seats

Total 2 Daily 100 seats

Chicago (O’Hare) 2 Daily EMB-145 100 seats

Washington (Dulles) 4 Daily Saab-340 136 seats

Total 6 Daily 236 seats

Slide

slide25

How Does YNG Land An Airline?

  • Revenue Guarantees
    • Money given to an airline to help offset financial losses that may occur during the startup of air service.
    • Money is given to the airline every quarter when losses are experienced.
    • Credits are received every quarter excess profits are experienced which are to be used to offset future losses.
  • Travel Banks
    • Local businesses pool money to be used for air travel and give it to the airline upfront as a incentive.
    • As these businesses “purchase” tickets from the airline their pooled money is used as payment until it is completely exhausted.
  • Incentive Packages
    • Fee waivers & marketing assistance are now the minimum standards necessary to attract airline service.

Slide

slide26

The Revenue Guarantee Mechanism

Annual Revenue

(Millions)

This chart does not represent Delta’s actual operating costs or forecasted profits. It’s purpose is to simply show how the program works and what the risk abatement payments represent.

Break Even

Load Factor

Delta Annual

Operating Revenue

Line

Annual Operating Cost

Line

Revenue Guarantee

PaymentsTo Delta

Potential Operating Profit

Potential Operating Loss

Potential Load Factor Range

100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50%

Load Factor

Slide

slide27

Revenue Guarantees Are An Investment

  • Sharing the Risk
  • Airlines Take a Large Financial Risk when Serving a New City
    • If the service is profitable… The airline makes a little profit
    • If the service isn’t profitable… The airline suffers big losses
  • Revenue Guarantees Allow the Community to Take On this Risk
    • If an airline serves your airport…
      • The community benefits instantly
      • The airline might not benefit at all
    • If an airline doesn’t serve your airport...
      • There are no benefits to the community
      • The airline is guaranteed not to lose money
  • Airlines Don’t Have Many if any Extra Aircraft
    • Revenue guarantees help your market look more attractive than somewhere the airline currently flies

Slide

slide28

Revenue Guarantees Are An Investment

  • Airlines Vs. Public Utilities
  • What Do We Call Places Without Electricity or Running Water?
  • The Sticks, Boonies, Backwoods, etc.
  • Why do we do this?
    • Electricity & Running Water provide the minimum standard of acceptable modern living
    • This is not a guarantee it will be profitable for utility that provides it
  • The Same Can Be Said For Air Service
    • What air service provides to a community is often far more valuable than any profit the airline can make providing it.
    • In many cases daily air service is the minimum standard businesses use when deciding the invest in a region.
    • Revenue Guarantees ensure that this air service is profitable for the airline while ensuring the community can continue to benefit from such a valuable service.

Slide

slide29

ONLY YOU

CAN PROVIDE THE SUPPORT NECESSARY

TO BRING DAILY AIRLINE SERVICE TO YNG