Air Service Support RequestMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Air Service Support Request
DATE: September 2, 2010
The City of Dubuque budgeted $150,000 as a revenue guarantee for commercial air
service at Dubuque Regional Airport. Airport Operations & Maintenance Supervisor
Todd Dalsing is recommending leveraging that money as a match for a Federal /State
Small Community Air Service Grant application with other partners to develop a pool of
$856,045 to enhance air service, which could include a fourth flight.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Michael C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
Todd Dalsing, Airport Operations & Maintenance Supervisor
Dubuque
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DUBUQUE REGIONAL AIRPORT
Airport Commissioners + Steve Accinelli Doug Brotherton Charles Daoud Mike Santillo Sue Hafkemeyer
August 26, 2010
Mr. Michael Van Milligen
Dubuque City Manager
50 W. 13 Street
Dubuque, IA 52001
Dear Mr. Van Milligen:
0 II
RE: Air Service Support Request
11000 Airport Road + Dubuque, Iowa 52003
Tel: 563 -589 -4128 Fax: 563 -589 -4108
wwwfydbq.com
As you are aware, the Dubuque Regional Airport and the level of existing air service are
subject to significant external pressures from competing airports and general condition of
the economy. Since 2001, we have lost technically three carriers, United Express in 2001,
Northwest Airlink in 2003 and Northwest Airlink/Delta Connection in 2008 along with much
of our flexibility of selecting hubs. As a result, in late 2005, the City, County and the
Chamber all discussed appropriating funds to assist in attracting quality air service.
Establishing a pool of funds from a community can help mitigate the high fuel prices, air
carriers losing billions of dollars a year, and numerous bankruptcies which have created a
new paradigm for small communities who seek improved air service. Airlines call this "risk
sharing." They consider the sharing of risk to be crucial to any discussion of restoration of
air service.
The most effective means of risk sharing is a revenue guarantee. This consists of the
community and /or selected businesses providing a minimum revenue guarantee. This
generally requires the community and air carrier agree to a certain amount in which the air
carrier will not lose money for trying out the service. In 2007, the City of Dubuque, Dubuque
County and the Dubuque Area Chamber of Commerce all committed to funding a revenue
guarantee to assist the Dubuque Airport in attracting additional air service. The total
revenue guarantee was $425,000 and the breakdown was:
• City of Dubuque $250,000
• Dubuque County $125,000
• Dubuque Area Chamber $50,000
In November 2007, a delegation of Dubuque business leaders visited Northwest Airlines
Headquarters to discuss the possibility of adding flights to Minneapolis /St. Paul International
Airport. In February 2008, Northwest Airlines announced it will begin service to Dubuque
with two flights per day starting June 2008. Northwest requested $100,000 to be used in
marketing the new service, all of which came out of the City of Dubuque's portion of the
revenue guarantee contribution.
Northwest began operating two flights to /from Minneapolis /St. Paul International Airport on
June 20, 2008. In October 2008, Northwest announced they will be merging with Delta
Airlines. Dubuque Airport was told that the merger will not affect service, but Delta airlines
developed a new Midwest strategy that did not include flights to /from Dubuque and Delta
airlines subsequently pulled its service in August 2009.
During that same time frame, in November 2008, due to high fuel costs and collapsing
economy, American Airlines /American Eagle Airlines announced it will pull one flight per
day to /from Chicago O'Hare. That left Dubuque with three flights per day to /from Chicago
O'Hare Airport and two flights per day to /from Minneapolis /St. Paul.
High fuel costs continued into early 2009, along with the collapsing economy, mortgage
crisis and job losses creating an unstable financial situation for airlines. In March 2009,
American Airlines /American Eagle requested a revenue guarantee of $320,000 to keep the third
flight (Flight #4226) operating in Dubuque. The funding for this revenue guarantee was
financially supported by the community revenue guarantee. American Airlines /American Eagle,
so far to date, has never asked Dubuque for any of the revenue guarantee funding regarding
the flight and the signed contract with them will be concluded on September 1, 2010.
Today, August 2010, Dubuque has three flights per day to /from Chicago O'Hare with American
Eagle /American Airlines. Many business leaders and travelers have expressed the need for
additional air service for connectivity. A recent Mead & Hunt Passenger Demand Analysis study
confirms Dubuque is lacking service to the west region of the U.S.
The Department of Transportation has recently passed a bill that helps small non -hub airports
with monetary support. This bill titled Small Community Air Service Development Pilot Program
Grant has $10 million that may be disbursed to 40 communities across the United States. The
grant proposal clearly states that the core objective of the Pilot Program is to promote
community involvement in addressing air service issues through public /private partnerships.
This includes having a financial commitment from the community to achieve our developmental
objectives. The DOT does recognize that some communities may have greater financial
resources than others, but they still expect a direct relationship between the amount of Federal
support that a community seeks and the amount that it is prepared to contribute toward the
proposed grant application.
The Small Community Grant application is specifically written $500,000 in funding from the
Department of Transportation to gain additional air service with west region capabilities. The
grant application is due on Thursday August 26, 2010. The financial breakdown is:
DOT Small Community Grant Request: $500,000
In Kind Marketing: $31,045
Potential Community Support: $325,000 **
Grant Total $856,045 **
Potential Community Support Breakdown
• Chamber of Commerce contribution $50,000*
• Dubuque County contribution $125,000*
• City of Dubuque Economic CIP $150,000*
DESCRIPTION CASH IN KIND
Television:
TOTAL
KWWL -TV. local
NBC affiliate
television station
510,000
510,000
520,000
Raffia J
Queen B Radio,
localy owned
radio stations
S10,005
$10,005
520.010
Cumulus
Broadcasting,
local radio stations
510,080
55,040
515,120
Outdoor: 1
Lamar
Advertising. local
!Aboard
$10,425
56,000
S16,425
Total
$40,510
$31,045
$71,555
Our goal is to continue positive growth for the region by applying for and hopefully receiving the
Small Community Air Service Development Pilot Program Grant in 2010. If successful with the
grant application the Dubuque Regional Airport will start the process of meeting with airline
representatives to establish additional service to the west region.
Airport staff is gathering all the information needed for the written portion of the grant. To further
gain regional support for the grant and to grow air connectivity a consortium of communities
needs to be established. Letters of support have been solicited from the surrounding
communities; to date DBQ Airport has received over 50 support letters.
The financial breakdown of DBQ's Small Community Air Service Grant application is:
DESCRIPTION
Airline attentive
pro • ram:
Marketing campaign
Revenue guarantee
Consultant fees
Total
Percent of total project
FUNDING SOURCE
US DOT AIRPORT NON- AIRPORT
IN-
CASH CASH KIND CASH Ill -KIND TOTAL
-_-
5500,000
$600,000
58%
$0
0%
$0
540,510
$259,490
525,000
$326,000
38%
$31,045
$31,045
4%
$759,490
S25,000
$856,045
Percent of cash
contribution
The Dubuque Regional Airport is working hard to gain more flights. Below is a list of proactive
steps to improve and add service.
1. In 2006, the Dubuque Regional Airport purchased $980,000 worth of airline ground
support equipment for airlines to use.
2. The Dubuque Regional Airport Commission voted in January 2010 to continue low costs
for carriers by continuing a rate freeze for another year at 2001 rates on landings, rents,
charges etc.
3. Applying for Grants -
a. Iowa Department of Transportation Air Service Enhancement Grant — to help
defray costs of adding a fourth flight to /from Chicago O'Hare on American
Eagle /American Airlines. $183,000
b. Department of Transportation — Small Community Air Service Development
Grant to add service with west region possibilities. $500,000
c. Iowa Department of Transportation Air Service Sustainment Grant — to help
continue marketing of American Eagle /American Airlines service $25,000.
4. Hiring a Contract Sales Consultant — to meet face to face with local business leaders
discussing air travel concerns out of Dubuque.
5. A Dubuque delegation of business leaders will be meeting with American Airlines in
Dallas on August 27, 2010 to discuss the return of the fourth flight to /from Chicago
O'Hare.
6. FIyDBQ Rewards program — thanks travelers for choosing DBQ by giving rewards,
coupons, American Airline AAdvantage miles, American Airlines Admirals Club
memberships.
The DBQ Airport Commission has already committed to keeping operating costs low for air
carriers at a significantly reduced rate, but that alone has proven insufficient to attract a new
carrier or expanded service from American Eagle.
American has already succeeded here in DBQ with a "risk sharing" approach. With the
funding from the Small Community Air Service Development grant and community
involvement we believe we will be able to attract more air service. This is why we are
reviewing our recruitment tools and seeking confirmation of the $150,000 from the City of
Dubuque. Your support is requested.
Sincerely,
Michael Santillo
Dubuque Regional Airport Commission Chairperson
CC: Airport Commission
•
Q
i t
DUBUQUE REGIONAL AIRPORT
Memorandum
To: Todd Dalsing
From: Karin Spisak, Marketing Coordinator
Date: August 26, 2010
Subject: SCASDP grant application
INTRODUCTION:
Dubuque Regional Airport is applying for the Small Community Air Service Development Grant to
assist in gaining additional air service to west region of U.S.
BACKGROUND:
Community support funding of $325,000 are pledged to an air service agreement with American
Airlines regarding a revenue guarantee for the third flight operating at Dubuque until September 1,
2010. So far American Airlines never signed nor has asked for any of the funds and the air
service agreement. Community Support funding breakdown consists of:
City of Dubuque: $150,000
Dubuque County: $125,000
Dubuque Area Chamber of Commerce: $ 50,000
Total $325,000
The Small Community Grant Application is due on August 26, 2010. The Dubuque Regional
Airport staff fully understands that the community support funding will not be available until after
September 1, 2010.
If before September 1, 2010, American Airlines requests the community support funding, then the
Airport will withdraw the Small Community Air Service Grant application.
If after September 1,2010 and American Airlines does not request the air service funds, the intent
of Dubuque Regional Airport is to roll over the community support funds into matching funds for
the Small Community Air Service Development Grant application. The more community support
funds applied, the better the chances for grant approval.
Dubuque Regional Airport Commission has sent letters to the three community support funding
entities, the City of Dubuque, the Chamber of Commerce and Dubuque County explaining the
grant application and requesting funds.
The Small Community Grant application is specifically written for $500,000 in funding from the
Department of Transportation to gain additional air service with west region capabilities. The
financial breakdown is:
DOT Small Community Grant Request: $500,000
Potential Community Support Funds: $325,000
In Kind Marketing: $ 31,045
Grant Total $856,045
Telephone :
Fax :
e -mail :
(563) 589 -4237
(563) 589 -4108
kspisak@cityofdubuque.org
RECOMMENDATION:
Apply for Small Community Air Service Development Grant.
BUDGET IMPACT:
City of Dubuque, Capital Improvement Funds: $150,000
Airport Marketing Budget (Mead & Hunt): $ 14,950
ACTION STEP:
Airport Commission respectfully requests City CIP funds of $150,000 to be put towards the Small
Community Air Service grant application.