Sioux Falls Regional Airport, South · PDF fileIn Support of Frontier Airlines Service to/from Denver ... Please provide a brief synopsis ... Airport management believe this new service

Docket: OST-2006-23671

Before the Office of the Secretary of Transportation

U.S. Department of Transportation

Sioux Falls Regional Airport, South Dakota Proposal Under the Small Community Air Service Development Program

An Integrated Program of New Low-Fare Service Development via;

Start-up Cost Offsets, Advertising/Marketing and Revenue Guarantees In Support of Frontier Airlines Service to/from Denver

Sponsor: Sioux Falls Regional Airport

Michael Marnach – Executive Director

Dun & Bradstreet Number: 803178011

April 2006

Sioux Falls, South Dakota – Small Community Air Service Development Grant Application – April 2006 2

Table of Contents

Description Page number(s)

Table of Contents 2

Introductory Letter 3

Applicant Information 4-8

Executive Summary 9-14

Detailed Explanation of Proposal 15-16

Use of Local / Federal Funds 17-18

Public / Private Partnerships 19

Role of Partnerships 19

In-kind Services 19

Expected Results 20-23

Performance Measures 24

Financial Controls 24

Return on Investment 24

DOT Exit Strategy 24

Alternate Plan 25

Letters of Support 26-28

Air Service at Sioux Falls 29-32

Air Service Deficiencies 33-35

Availability of Alternate Airports 36

Service Provided to Diverse Users 37

Air Service Advisory Groups 37

Local Air Service Development Efforts 38

Extenuating Factors Affecting Air Service 39

Sioux Falls Community Summary Information 40-43

Comparison of Sioux Falls to Regional Communities 44-47

Conclusion 48


Introductory Letter


Applicant Information

Not a Consortium Community now receives EAS subsidy

Interstate Consortium Intrastate Consortium

Community Name Sioux Falls, SD

Address 2801 Jaycee Lane

City, State, Zip-code Sioux Falls, SD 57104

Point of Contact: Michael Marnach

Phone: 605-336-0762

Fax: 605-367-7373

Email: [email protected]

County: Minnehaha

Dun & Bradstreet #: 803178011 Designated Legal Sponsor: Name Michael Marnach

Title Executive Director

Organization Sioux Falls Regional Airport

Address1 2801 Jaycee Lane

City, State, Zip-code Sioux Falls, South Dakota 57104

Phone: 605-336-0762

Fax: 605-367-7374

Email: [email protected] Public/Private Partnerships:

1. Sioux Falls Development Foundation (Forward Sioux Falls)

2. Sioux Falls Area Chamber of Commerce

3. Sioux Falls Convention and Visitors Bureau

4. Sioux Falls Regional Airport


Project information:

Marketing Upgrade Aircraft New Route

Personnel Secure Increased Frequency Low Fare Service

Travel Bank Service Restoration Surface Transport

Subsidy Regional Service Other (specify)

Revenue Guarantee Launch New Carrier

Start Up Cost Offset First Competitive Service

Study Secure Additional Carrier

Project Goal: Project is intended to address problems involving:

High Fares

Insufficient Air Service

Unique Airport Circumstance

Access to National Transportation System Needed

Other (specify)

Please provide a brief synopsis (in one paragraph) of the highlights of your proposal:

Sioux Falls Regional Airport has presented an air service recruitment package to Frontier

Airlines for service to/from Denver. Frontier may be interested in beginning this service

using 70-seat regional jet or 70-seat turboprop aircraft. The entrance of Frontier in Sioux

Falls would represent the region’s SECOND low-fare service provider, following America

West Express’ entry in 2004. In order to eliminate the barriers to entry, the Airport has

assembled a program of startup cost offsets. In order to promote the service, the Airport

is providing money for advertising and marketing. The Airport is requesting funds from the

U.S. DOT to provide Frontier a minimal insurance package, via a revenue guarantee, to

help alleviate some of the risk involved in beginning this service.


Project Cost: Federal amount requested: $ 350,000

Total local financial contribution: $ 70,717

Airport funds: $ 35,717

Non-Airport funds: $ 35,000 Sioux Falls Development Foundation

State financial contribution: $ 0

Existing funds: $ 0

New funds: $ 0

In-kind contribution: $ 44,895 Ramada Inn

(Amount & description)

Total cost of project: $ 465,612

Air Service Development Zone: Airport Information: Airport Name: Sioux Falls Regional Airport

Airport City: Sioux Falls

Airport State: South Dakota

Airport Code: FSD

Airport Classification at Sioux Falls:

Non Hub Small Hub Medium Hub Other Existing landing aids at Sioux Falls:

Full ILS Outer/Middle Marker Published Instrument Approach

Localizer Other Existing Service at Sioux Falls:

Jet service Low Fare Service Turboprop


Air Carriers Serving Sioux Falls:

Air Wisconsin (UA) Allegiant

American Eagle (AA) Comair (DL)

Mesa (HP) Mesaba (NW)

Northwest Pinnacle (NW)

SkyWest (DL) SkyWest (UA)

Current Flight Information for Sioux Falls: (as of April 2006)

CVG = 14 Roundtrips per week on Comair (DL) with CRJ 200’s.

DEN = 28 Roundtrips per week on United Express with CRJ 200’s.

LAS = 4 Roundtrips per week on Allegiant with MD80’s.

LAS = 2 Roundtrips per week on Northwest Airlines with 319’s.

MSP = 7 Roundtrips per week on Northwest Airlink with ARJ’s.

MSP = 12 Roundtrips per week on Northwest Airlink with SF3’s.

MSP = 7 Roundtrips per week on Northwest Airlines with DC9’s.

MSP = 7 Roundtrips per week on Northwest Airlines with 319’s.

MSP = 6 Roundtrips per week on Northwest Airlines with 320’s.

MSP = 12 Roundtrips per week on Northwest Airlink with CRJ 200’s.

ORD = 35 Roundtrips per week on United Express with CRJ 200’s.

SFB = 2 Roundtrips per week on Allegiant with MD80’s.

136 Total Flights

Enplanements at Sioux Falls:

2001: 285,144

2002: 224,796

2003: 294,284

2004: 327,672

2005: 355,290


Airfares at Sioux Falls: (Fared Avg Fares Based on US DOT OD1A Survey –

12 months ended September 2005)

O&D Market: Las Vegas Airfare: $262 RT 10.86¢ per mile O&D Market: Denver Airfare: $354 RT 25.72¢ per mile O&D Market: Phoenix Airfare: $368 RT 15.35¢ per mile Proximity of Other Airports to Sioux Falls:

Non-hub (w/jet service): Sioux City, Iowa 79 driving miles

Small Hub: Des Moines, Iowa 281 driving miles

Medium Hub: Omaha 182 driving miles

Large Hub: Minneapolis-St Paul 260 driving miles

Low-fare service: Omaha 182 driving miles


Executive Summary

Primary Objectives of Proposal

Objectives for Program:

• Increase Enplanements

• Achieve Competitive Pricing

• Increase Regional Awareness of Air Service Available

Means to Achieve Objectives:

• Recruit Low-Fare Carrier

Course of Action to Support Means:

• Provide Start-up Cost Offsets

• Initiate Marketing and Advertising Campaign

• Make Available Revenue Guarantee

Program Costs:

• Total Costs: $465,612

• Federal Share: $350,000

Sioux Falls Area Overview

The Sioux Falls Regional Airport serves the 185,000 residents located in the Metropolitan Statistical

Area (MSA) (Minnehaha and Lincoln counties), as well as being the primary air transportation

node for an area comprising 32 counties in southeast South Dakota, southwest Minnesota,

northeast Nebraska and northwest Iowa. With enplanements of roughly 355,000 in 2005, Sioux

Falls is classified as a small hub airport. Within a 90-minute drive of the Sioux Falls Airport reside

over 800,000 people.

While airline service is also offered at Brookings, Huron, Aberdeen and Watertown, the Sioux Falls

Regional Airport is the nearest airport with jet service for the entire eastern half of South Dakota.

The nearest large hub airport is located 260 driving miles northeast of Sioux Falls, at Minneapolis-

St Paul. The nearest low-fare service is 182 driving miles south of the community, at Omaha.


Sioux Falls has some of the highest average airfares in the entire country, despite the newfound

presence of America West and Allegiant Airlines. Traffic is dominated by two major airlines:

Northwest, and United, with Delta, America West and Allegiant pulling minor shares of traffic.

Both United and Northwest provide good connections to the eastern half of the United States

through hubs in Minneapolis/St. Paul (Northwest) and Chicago (United). However, connections

to the western part of the US, including all large West Coast destinations, are limited to flights

through United’s Denver hub. Due to a lack of competition on these routes, fares are extremely

high. These high fares have had the effect of deterring passengers from flying.

Table 1:

Officials at the Sioux Falls Regional Airport believe competition is needed from a “low-fare

carrier” – initially one with service to the west. To support this growth program, the airport is

requesting a one-time Federal Grant in the amount of $350,000. This will augment $35,000 in

local cash, $35,717 in airport fee waivers and $44,895 in crew accommodation discounts.


Together this money, totaling $465,612, will be used to help recruit low-fare service to the Sioux

Falls market. The airport has recruited Frontier Airlines to begin non-stop, low-fare service to its

Denver hub. Airport management believe this new service could also have the effect of

lowering fares on routes in the western US, and causing traffic to increase at the Sioux Falls

Regional Airport.

The Denver Conundrum

Sioux Falls is fortunate to have regional jet and mainline service on three of the world’s largest

airline networks. However, the problem in the market is not just access, but rather the cost of

that access. The Sioux Falls Regional Airport, and the entire region, would benefit and grow with

the introduction of new low-fare service in a way that is not possible with the incumbent carriers.

The benefit of low-fare service at Sioux Falls Regional Airport would not only benefit the 504,000

people residing within Sioux Falls Regional Airport’s Primary Catchment Area, but also the more

than 1 million people in the Secondary Catchment Area for which Sioux Falls represents the

nearest airport for any competitive service and jet service.

Table 2:

Local vs. Connecting Passengers on United at Sioiux Falls via Denver

Denver on XX, 30,780

Denver on UA, 9,240

Connecting, 106,794

Denver on UA Connecting Denver on XX


Sioux Falls Regional Airport is presently served daily by United Express to Denver. For the twelve

months ended September 2005 United Express offered an average of 262 seats per day each

way on an average of 4.9 departures per day. By this measure, one could say that the Sioux

Falls to Denver market is well-served. However, of the 212 passengers departing on United

Express via Denver on average each day, only 12.6 passengers, or 5.2% of the total onboard

passengers are reported as United Airlines passengers in the local Denver – Sioux Falls market.

An additional 42 departing passengers per day are reported on “XX”, or “Commuter” airlines in

the local Denver – Sioux Falls market. However, because of the reporting vagaries of these

“Commuter” passengers, there is no way of knowing the exact number that are misreported in

the local market. Therefore, United Airlines could be carrying anywhere from a low of 12.6 to a

high of 54.6 local Denver – Sioux Falls passengers each day each way. Even assuming that

United carries 54.6 passengers per day each way, there would then still be the majority of

passengers, 157.4 per day each way (74.2% of the total) that connect through Denver to other

markets in the western U.S. It is to all of these markets, including Denver, that Sioux Falls wishes to

provide competitive service.

In no way is this application meant to materially attack the excellent service provided to the

community by United Express. The fact of the matter is that for a market such as Sioux Falls,

located in the upper Midwest, there are not many options available from which to recruit low-

fare airline service. The largest low-fare carrier, Southwest Airlines is not interested in serving Sioux

Falls at this time. Airtran, Jetblue, Sun Country, Spirit and ATA do not have the right-size aircraft

to serve a market such as Sioux Falls. The merger of America West and US Airways has forced

America West to reconsider service to markets such as Sioux Falls, as they concentrate on the

integration of the network. That leaves Frontier Airlines as the only low-fare carrier remaining

who 1) has the aircraft sized correctly for the market and 2) is interested in serving Sioux Falls. The

tact that Frontier hubs at Denver and United hubs at Denver should not be reason enough to

disallow this application.

What this application proposes to do is bring fare competition to dozens of the 103 total

domestic destinations in the western U.S. that reported United Airlines passengers via Denver

over the latest twelve month period. In fact, of the top 20 Sioux Falls to western U.S. markets

served by United, Frontier Airlines can provide competitive service to 18 markets. By excluding

Oakland and Ontario (which are served by Frontier at both San Francisco and San Jose and also

at Los Angeles), Frontier serves all of the top 20 markets.


Table 3:

Top 20 United Airlines western markets at Sioux Falls, with Frontier service (YES/NO)

Rank City Pair PDEW Share Frontier Service

1 Phoenix 12.9 7.9% YES

2 Denver 12.7 7.8% YES

3 Las Vegas 11.0 6.8% YES

4 Los Angeles 9.6 5.9% YES

5 San Diego 9.0 5.5% YES

6 San Francisco 8.3 5.1% YES

7 Seattle/Tacoma 8.1 5.0% YES

8 Dallas/Fort Worth 7.2 4.4% YES

9 Santa Ana 6.6 4.1% YES

10 Ontario 5.9 3.6% NO

11 Sacramento 5.9 3.6% YES

12 Salt Lake City 5.3 3.3% YES

13 Portland 5.2 3.2% YES

14 San Antonio 4.0 2.5% YES

15 Albuquerque 3.8 2.3% YES

16 Boise 3.3 2.0% YES

17 Houston 3.2 1.9% YES

18 Reno 2.9 1.8% YES

19 Oakland 2.9 1.8% NO

20 Tucson 2.9 1.8% YES


Table 4:

Table 5:


Detailed Explanation of Proposal The Sioux Falls Regional Airport proposes new non-stop service to Denver on Frontier partner

Horizon Air (dba Frontier JetExpress) under the Small Community Air Service Development

Program. As previously mentioned, the Sioux Falls market lacks competitive connecting service

to the West Coast. New flights on Frontier JetExpress would solve both of these problems in the

market, while bringing fares down, and likely increasing enplanements.

Local Sioux Falls representatives met with executives of Frontier in Denver in November 2005. The

airline intimated that they might be interested in serving the market. Sioux Falls proposes one or

two daily non-stop flights to and from Frontier’s Denver hub. Service would be provided under

the Frontier JetExpress name, and operated by Horizon Air. Horizon would fly either a 70-seat

Canadair Regional Jet or a 70-seat Q400 turboprop. Flights would be timed to provide

maximum connecting opportunities for passengers traveling beyond Denver, to other cities

along the West Coast and into Mexico and Canada

Table 6:


Sioux Falls proposes a relatively small portion of the cost of starting the new service be supported

with federal funds from the Small Community Air Service Development Program. The Sioux Falls

Regional Airport requests a total grant of $350,000.

The Sioux Falls Regional Airport projects the grant money will provide insurance in case Frontier

needs help getting over the hump during the first year of operations, in what would normal be a

year of losing money on a new route. With demand for the service in the Sioux Falls market, the

Airport projects the new flights will become profitable on their own in the nine to 12-month

period. The flights should be fully self-sustaining in their second year of operation.

The objective of the proposal is two-fold. First, The Sioux Falls Regional Airport seeks to bring the

region’s first low-cost, low-fare provider to the community. This in turn would stimulate demand

and quell the leakage the airport experiences today. Second, through the successful

introduction of targeted low-fare service to Denver, Sioux Falls Regional Airport hopes to

encourage other carriers, both low-cost and full-service carriers, to enter the Sioux Falls market

and provide service to additional destinations. The historical support of the airport from area

travelers is evident in the peak passenger numbers experienced by the airport in 2005. Sioux Falls

Regional Airport is targeting this program to meet and exceed those peak numbers through

increased capacity, lowered average fares and increased service by new carriers to additional

non-stop markets.


Use of Local / Federal Funds

Airport Provided Marketing and Advertising

Sioux Falls Regional Airport proposes to spend $50,000 in funds on marketing and advertising

promotions in support of new service introductions. The goal is to increase ridership and usage

through targeted regional campaigns.

Airport Provided Startup Cost Offsets

Sioux Falls Regional Airport proposes to spend up to $35,000 in funds to pay for start-up costs in

support of new service introductions. Money will be reimbursed to Frontier as invoices are

submitted detailing the work performed to offset the acquisition of necessary equipment to

begin service (items include carts, tugs, power units, computer equipment, cabling, software,

etc.). Unspent funds will roll into the advertising and marketing program.

Revenue Guarantee

Sioux Falls Regional Airport proposes to make available at least $300,000 in funds for a revenue

guarantee to Frontier to cover start-up losses that may occur during the first twelve months of

service. Subject to negotiation, payments will be made to Frontier quarterly when income

derived from passengers and cargo is less than agreed expenses on the route. Revenue

generated that exceeds expenses will be carried forward and tapped before any grant funds

are used.

Airport Fee Abatements

In addition to the $35,000 in cash contributed by the Sioux Falls Development Foundation, the

Sioux Falls Regional Airport will waive landing fees and terminal rents for a twelve month period.

These fees are calculated to be $23,000 for terminal rent and $12,717 for landing fees. The total

contribution from the Airport itself will be $35,717.

Air Crew Accomodation Discounts

The Sioux Falls Ramada Inn pledges to offer 50% discounts off normal room rates for the three

Horizon Air crew members who will overnight in Sioux Falls. This in-kind contribution totals $44,895.

Additional Costs

As part of this program Sioux Falls Regional Airport understands that additional expenses will be

incurred, such as monitoring the results of the program and reporting those results back to the US

DOT. In addition, Sioux Falls Regional Airport expects to incur some expenses in the recruitment


of additional airline service. The Airport will pay for these additional expenses out of other airport

sources and will not incorporate these fees and charges into this proposal.


Public / Private Partnerships Air service development in the Sioux Falls community consists of the airport and several

organizations with ties to the business community, not only in Sioux Falls and Minnehaha County,

but the region as well. The Partnership consists of the Sioux Falls Development Foundation, the

Sioux Falls Area Chamber of Commerce and the Sioux Falls Convention and Visitors Bureau.

Role of Public / Private Partnerships The role of the community partnerships is to help target the air service needs in the community,

recruit additional airline service and encourage the use of the service once implemented.

Because of the importance of air service in the economic stability and growth of any region, the

Sioux Falls Development Foundation is providing the cash match for this program. All three

organizations will help promote the usage of the flights through newsletter features, e-mails

contacts, meetings and marketing materials. The Airport will coordinate the marketing program

that is a part of this proposal with the local newspapers and television stations.

In-kind Services from the Community Air Crew Accommodation Discounts

The Sioux Falls Ramada Inn pledges to offer 50% discounts off normal room rates for the three

Horizon Air crew members who will overnight in Sioux Falls. This in-kind contribution totals $44,895.


Expected Results While Sioux Falls Regional Airport customers will certainly take advantage of the non-stop

competition to the Denver market, its 2nd largest passenger market, the major reason for the

recruitment of Frontier is the dozens of domestic and international markets that are served on a

one-stop basis through Denver. While the focus on connecting traffic will be to and from the

west, the geographic location of Denver and Sioux Falls is such that connections are also logical

for customers traveling to the south central and southeastern U.S. – points such as Dallas/Fort

Worth, Austin, Orlando and Miami can be easily accessed through Frontier’s Denver hub.

Table 7:

Sioux Falls Regional Airport has based its expected results on local market conditions and US DOT

data available through June 2005. The proposed results from January 2007 through December

2007 follow:


Table 8:

These results assume that service is commenced with twice daily flights of a 70-seat regional jet

or Q400 turboprop aircraft to/from Denver. It is projected that the annual passenger demand

for Frontier service beginning in January 2007 will be 70,471 to and through Denver for an

average annual load factor of 74.5%. The actual passengers carried are projected to produce

$9.1 million in revenue, generating $6,749 per flight. Average itinerary mileage will be 982 miles

and yields are projected to be 13.17¢ on an average one-way fare of $129. The top projected

passenger markets can be viewed in Table 9.

Because of the low-fare nature of Frontier Airlines, the Sioux Falls Regional Airport expects that

fares in the western markets served by Frontier will average $129, versus the $189 average today.

It is further projected that Frontier will have no more than a 33% market share in any one market,

with a 29% share of the Denver market (as opposed to the 93% share of the market that United

experiences today.)


Table 9:

Table 10:


Table 11:

Table 12:


Performance Measures

The success of the program will be based on two measurable variables; the number of

enplanements at the airport and the average airfares charged in the effected city pairs. The

first measurement will include a monthly comparison once the program begins to past

enplanements numbers. The second measurement will be derived from US DOT OD1A reports.

Financial Controls

As the sponsor, Sioux Falls Regional Airport will be the responsible party for all fiscal matters and

DOT reporting requirements. As a public entity the DOT can be assured that proper financial

controls are in place to guarantee that the DOT’s grant will be used in accordance with any

subsequent agreement. Sioux Falls Regional Airport understands that the grant is a reimbursable

grant, meaning the Airport is responsible for program expenditures and will submit invoices to the

DOT for reimbursement, based on a percentage of the total grant request.

Return on Investment

Sioux Falls Regional Airport has developed a cost effective and achievable strategy to increase

enplanements at the airport. The proposal uses proven methods of achieving air service

improvements, allowing the DOT to be comfortable with choosing this proposal. The increased

competition and access to increased competition with airfares by adding service to Denver is a

major goal of the Small Community Air Service Development Program.

Only $100,000 of the $400,000 in cash is committed to being spent. The remaining $300,000 in

cash available for the revenue guarantee portion of the grant may never be expensed.

DOT Exit Strategy

Sioux Falls Regional Airport has developed this proposal as a one-time grant. While the initial

startup costs are expensed almost immediately, the advertising and marketing program will

commence a few months before service starts and last for at least twelve months. The revenue

guarantee program will also be in place for twelve months, with two additional twelve month

periods available for negotiation. It is projected that the service will be financially self-sustaining

within the second twelve months of service.


Alternate Plan

In the unforeseen circumstance that Frontier does not begin service before the end of summer

2007, Sioux Falls Regional Airport will seek another airline that can offer low-fare service to Sioux

Falls.


Letters of Support




Air Service at Sioux Falls Regional Airport

Sioux Falls Regional Airport receives scheduled daily service to three airports – Chicago O’Hare,

Denver and Minneapolis. United Express provides regional jet service to Chicago O’Hare and

Denver. Northwest Airlines provides a mixture of jet, regional jet and turboprop service to

Minneapolis and less than daily service to Las Vegas. In addition, Allegiant operates less than

daily service to both Las Vegas and Orlando. America West Express ceased operations to

Phoenix on April 1st, 2006.

Table 13:

Sioux Falls Regional Airport has experienced increases in passenger volumes since 2003, when

boardings began an upward trend that continues. In fact, over the latest twelve months the

Airport has set domestic, international and total passenger records – nearly 670,000 total. The

increase in passengers has also resulted in record domestic, international and total revenue

records as well - $125.2 million total, as average fares in Sioux Falls have been relatively

consistent over the past decade.


Table 14:

Table 15:


Table 16:

Table 17:


As of the twelve months ended in September 2005, Denver is reported to be Sioux Falls Regional

Airport’s 2nd largest passenger market and 3rd largest revenue market. Among the top 20

passenger markets at Sioux Falls, 12 of those markets can be served by Frontier Airlines through

Denver. This includes #1 Las Vegas, #2 Denver, #4 Phoenix, #9 Dallas/Fort Worth, #11

Seattle/Tacoma, #12 Los Angeles, #13 San Diego, #14 San Francisco, #15 Houston, #16 Portland,

#19 Santa Ana and #20 San Antonio.


Air Service Deficiencies

Sioux Falls Regional Airport has two main deficiencies in air service; 1) the Airport does not have

enough capacity to meet the demand to points located to the western U.S., and 2) the Airport

does not have substantive low-fare competition to its major airlines. Over the past twelve

months United Express has averaged load factors of 80.4% with four year-round flights per day.

The market also absorbs and supports a fifth flight that has been added during the summer

months over the past few years.

Table 18:

In terms of airfares to the western U.S. Sioux Falls airfares are 16.2% above the Midwest regional

average (Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota and Wisconsin). At

Sioux Falls’ top 20 markets that can be served by Frontier through Denver, average fare

differences vary from 2.3% to/from Boise to 37.9% to/from Salt Lake City. Other large differences


exist between Sioux Falls and Phoenix (37.8%), Dallas/Fort Worth (35.6%), Seattle/Tacoma (24.2%)

and Los Angeles (32.6%).

Table 19:

Fare differential between Sioux Falls and Midwest markets to top 20 western Sioux Falls markets

Market FSD Fares Midwest Fares Difference

1 Las Vegas $131 $123 6.0%

2 Denver $177 $129 37.1%

3 Phoenix $184 $134 37.8%

4 Dallas/Ft Worth $215 $158 35.6%

5 Seattle/Tacoma $209 $168 24.2%

6 Los Angeles $209 $158 32.6%

7 San Diego $182 $154 18.7%

8 San Francisco $199 $192 3.6%

9 Houston Intercontinental $201 $174 15.5%

10 Portland, OR $215 $196 9.6%

11 Orange County $194 $183 5.7%

12 San Antonio $185 $176 4.6%

13 Sacramento $213 $191 11.4%

14 Ontario $187 $184 1.7%

15 Salt Lake City $232 $169 37.9%

16 Albuquerque $176 $162 8.9%

17 Anchorage $272 $260 4.9%

18 Austin $179 $172 4.1%

19 Boise $195 $191 2.3%

20 Reno $181 $166 8.9%

Total $189 $163 16.2%

As of June 2006, Frontier Airlines will serve 78 domestic airports, not including Denver, with 54 of

those airports located west of the Denver hub. Frontier service will greatly increase the level of

one-stop connections offered to/from Sioux Falls and will offer competitive low-fare service to

dozens of western airports which are presently served on a one-stop basis from Sioux Falls by

United Airlines.

Among the domestic airports that are now served by United Airlines and which will receive new

competitive one-stop connecting service via Denver are Albuquerque, Boise, Las Vegas, Los


Angeles, Orange County, Phoenix, Portland, Sacramento, San Diego, San Francisco, San Jose,

Seattle/Tacoma, Spokane and Tucson – 54 one-stop domestic airports in total. This total does

not include the new competitive service to half a dozen Canadian and Mexican destinations.

Table 20:

Frontier to be First Competitive One-stop Airline Service = 54 Airports

Alamosa Gillette Riverton

Albuquerque Grand Island Rock Springs

Alliance Grand Junction Sacramento

Amarillo Hays Salt Lake City

Anchorage Houston Intercontinental San Antonio

Austin Kearney San Diego

Billings Laramie San Francisco

Boise Las Vegas San Jose

Chadron Liberal Santa Fe

Cheyenne Los Angeles Scottsbluff

Cortez McCook Seattle/Tacoma

Dallas/Ft Worth North Platte Sheridan

Dickinson Oklahoma City Spokane

Dodge City Orange County Telluride

El Paso Phoenix Tucson

Farmington Portland, OR Tulsa

Fresno Pueblo Williston

Garden City Reno Worland


Availability of Alternate Airports

The nearest airports to Sioux Falls are Sioux City (SUX), Brookings (BKX), Watertown (ATY) and

Huron (HON). None of these airports are served by more than one airline or have jet service,

with several being Essential Air Service markets. The nearest competitive airport for Sioux Falls

residents is Omaha Eppley Airfield – 3 ½ hours south. The majority of area leakage travels to

Omaha. Additionally, Minneapolis/St Paul is a 4 ½ hour drive (in good weather) to the north and

east of Sioux Falls.

Table 21:


Service Provided to Diverse Users

The Sioux Falls area contains a great diversity of businesses and organizations, including

government, education, agriculture, technology and tourism. The service requested via Denver

would serve a large portion of the market west of the hub.

Table 22:

Air Service Advisory Groups

The Sioux Falls Regional Airport has established an Air Service Advisory Group to help recruit new

service and support incumbent airlines. The Group consists of the Sioux Falls Development

Foundation, the Sioux Falls Area Chamber of Commerce and Forward Sioux Falls, as well as the

Airport.


Local Air Service Development Efforts

Since 2003 the Sioux Falls Regional Airport has been aggressively pursuing air service initiatives. In

2003 Sioux Falls visited with America West Airlines, Allegiant Airlines and Delta Air Lines. The results

of these initiatives have been Delta Connection service to Cincinnati, Allegiant to Las Vegas

and America West to Phoenix. The last service the result of a cooperative arrangement

between Sioux Falls, America West and the U.S. DOT through the Small Community Air Service

Development Grant.

In 2005 Sioux Falls visited again with Delta and Allegiant and added a visit to Frontier Airlines in

November. Allegiant added several flights per week to Orlando Sanford in November 2005,

while Delta has announced one daily flight to Salt Lake City beginning June 8th, 2006. The visit to

Frontier corresponded to a request for United to add seat capacity to Denver to carry the

additional passenger demand experienced to the west. Frontier was not approached until the

Airport was certain that the market and the incumbent airlines could support the competition.

While America West announced its departure from the market in December 2005 effective April

2006, citing high fuel prices, a merger with US Airways and low load factors during the summer

months, the Airport continues to work with America West to bring the service back, at least on a

seasonal basis.


Extenuating Factors Affecting Air Service

While America West Airlines began west-bound service to Phoenix in 2004, the service provided

was once daily with a mid afternoon departure from Sioux Falls. While this service was used

quite often by the leisure and discretionary community for travel to Phoenix during the traditional

colder season in Sioux Falls, the timing of the flight during the summer was not conducive to

business travel and usage suffered.

Table 23:

Local vs. Connecting Passengers on United at Sioux Falls via Denver

Phoenix, 15,442

Connecting, 9,603

Phoenix Connecting


Sioux Falls Region Information

Sioux Falls is not only South Dakota’s largest city; it is the largest city in the four northwestern

states of Wyoming, North Dakota, Montana and South Dakota. It’s a regional hub of

commerce and transportation, and consistently ranks among the best places in America to live

and to raise a family. The City of Sioux Falls is home to almost 135,000 people, while the metro

area has a population of 185,000 (Source: US Census 2003 Projections). Within a 90-minute drive

of the Sioux Falls Airport reside over 800,000 people.

The Sioux Falls economy continues to thrive. Companies continue to open new facilities in Sioux

Falls while established companies expand; creating new jobs, infusing new capital, and

broadening our tax base. Since 1990, nearly $2.5 billion worth of construction has occurred, over

15,000 new housing units have been built, and non-farm wage and salary employment has

increased by nearly 39,000.

Companies from all across the nation have discovered that the business climate of Sioux Falls is

perfect for growing a business. The tax bite here is smaller, the cost of doing business allows

companies to make a decent profit and government sees itself as a partner for growth, not an

adversary. Add practical business incentives to that mix and you've got a formula for success, in

Sioux Falls.

Sioux Falls’ business community is anchored by a varied group of companies, providing a

diversified economic base for the region. Moreover, the community enjoys a business

community with enough different components to avoid the lows of a bad economy.

Sioux Falls has five companies who each employ more than 2,000 people. Two of the five are

health service related, two are major banking conglomerates (Citigroup and Wells Fargo), and

the fifth is a huge meat processing company that boasts being one of the largest in the Midwest.

Sioux Falls has dozens of companies that employ more than a hundred employees each. These

companies are diversified, with interests from manufacturing, to communications, to

entertainment, to pharmaceuticals.


Table 24:

Sioux Falls is also home to a pair of major universities and a major college. Augustana College,

founded in 1860, is the largest private college in the state. The college has a reputation for

academic excellence & the average ACT of enrolling freshmen is 24.5--highest in the state. The

college has been ranked by U.S. News as a top ten Midwest Regional Liberal Arts College as well

as a top ten college in terms of value. Affiliated with the Evangelical Lutheran Church of

America, Augustana has an annual enrollment of 1,800 students. The University of Sioux Falls is a

private, coeducational, residential Christian university founded in 1883. Affiliated with the

American Baptist Churches, USA—USF is the second largest & the oldest private university in

South Dakota. More than 1,400 students from 24 states & a variety of foreign countries walk the

halls & pathways of the Midwest campus. “USDSU” is located in a brand new state-of-the-art

facility on the campus of Southeast Technical Institute. The University of South Dakota, South

Dakota State University & Dakota State University together provide complete Certificate,

Associate's, Bachelor's & Master's degree programs in Sioux Falls.


Table 25:

The community-wide efforts in Sioux Falls to maintain one of the healthiest environments in the

nation in which to live, work and raise a family are making headlines. The sample of accolades

below reinforces the Sioux Falls area’s vitality as a regional and national leader in economic

development, retail sales, health care, manufacturing, financial and business services and

quality of life.

• For the second year in a row, Forbes’ annual survey of the Best Places for Business and

Careers named Sioux Falls No. 1 overall in the Best Small City Category. The city rated No.

3 in the magazine’s Income Growth Index and No. 4 in the Cost of Doing Business Index

(May 2004). In 2002, the magazine ranked Sioux Falls No. 5 overall.

• CNN/Money Magazine reported unemployment figures for the top and bottom 20

Metropolitan Statistical Areas (MSAs) in the U.S., based on The Bureau of Labor Statistics’

March 2003 unemployment rates. Sioux Falls made the Top 20 list coming in at No. 9 with

a 2.9 percent unemployment rate.

• Business Week named Sioux Falls one of the “Dazzling Dozen” Pockets of Prosperity where

the economy is still humming. The article states that while “growth remains healthy” in


Sioux Falls and “the national economy is sputtering, other metropolitan areas also have

tight labor markets and growing economies” (October 2002).

• South Dakota ranked No. 1 in the “Small Business Survival Index 2002,” a study compiled

by Washington, D.C.-based Small Business Survival Committee. The study, which ties

together 20 major government-imposed or government-related costs that affect small

businesses, ranked South Dakota first in three tax-rate categories: personal income,

capital gains and corporate (July 2002).

• Sales & Marketing Management magazine, calling Sioux Falls a “diamond in the rough,”

designated the city as a great smaller market for businesses to make a move. The

magazine cited the community’s growth rates as a huge opportunity and recognized

the state’s friendly tax laws (April 2002).

• In Ladies’ Home Journal’s study of the 200 cities considered the best cities for women in

2002, Sioux Falls was named the third least stressed city. The magazine also scored Sioux

Falls high for economy (No. 2), highest employment rates (No. 2), spiritual centers (No. 9),

available jobs (No. 10) and lifestyle (No. 12) (April 2002).

• Sioux Falls received an A+ on Zero Population Growth’s 2001 Kid-Friendly Cities Report

Card. The city excelled in health, public safety, education, economics, environment and

community life, ranking third out of 140 cities.

• The Software and Information Industry Association (SIIA) placed Sioux Falls No. 11 out of

25 metropolitan areas for software-related employment in 2000.


Comparison of Sioux Falls to Regional Communities The average airfare for passengers traveling to/from Denver and airports west is $163 one-way

among all Midwest airports (Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota,

and Wisconsin) and $184 one-way at Sioux Falls. Sioux Falls’s average fare is 12.9% above the

Midwest average.

In terms of average fare per mile (yield) to airports west of Denver (including DEN) Midwest

airports average 11.12¢ per passenger mile. Sioux Falls’s average yield of 14.22¢ to these same

airports is 27.9% higher than the regional average.

Table 26:

Fares and Yields at Midwest Airports to/from Denver and Airports West

1 Duluth $202 1 Rapid City 15.63¢

2 Fargo $200 2 Lincoln 14.58¢

3 Wausau $197 3 Sioux Falls 14.22¢

4 Appleton $193 4 Fargo 13.83¢

5 Green Bay $193 5 Duluth 13.62¢

6 Cedar Rapids $189 6 Bismarck 13.22¢

7 Madison $185 7 Des Moines 13.04¢

8 Sioux Falls $184 8 Cedar Rapids 12.85¢

9 Des Moines $183 9 Wausau 12.65¢

10 Bismarck $174 10 Omaha 11.97¢

11 Chicago O'Hare $172 11 Minneapolis 11.90¢

12 Lincoln $172 12 Appleton 11.78¢

13 Peoria $169 13 Green Bay 11.72¢

14 Moline $169 14 Madison 11.49¢

15 Bloomington-Normal $168 15 Chicago O'Hare 11.16¢

16 Rapid City $166 16 Peoria 11.11¢

17 Minneapolis $163 17 Moline 10.62¢

18 Milwaukee $152 18 Bloomington-Normal 10.57¢

19 Omaha $150 19 Milwaukee 10.06¢

20 Chicago Midway $121 20 Chicago Midway 8.25¢

Midwest Average $163 Midwest Average 11.12¢

In a comparison to two similar size markets that have low-fare service – Boise and Spokane –

Sioux Falls catchment area is larger than either, however passenger volumes are a fourth of the

volumes experienced at either Boise or Spokane (see Tables 27 - 29).


Table 27:

Table 28:


Table 29:

The Sioux Falls Regional Airport looked at all 72 airports in the U.S. that have the potential for

Frontier JetExpress service. By comparing passengers, revenue, fares, yields and distance to

Denver, it was determined that the potential value to Frontier of flow passengers through Denver

from Sioux Falls represents the 5th best opportunity for future air service additions (see Tables 30-

31).


Table 30:

Table 31:


Conclusion

Among the 200 largest domestic passenger markets in the U.S., Sioux Falls Regional Airport

average fares are the 7th highest. Because of this, the Sioux Falls Regional Airport has been

aggressively pursuing new airline service to the area in order to stimulate competition, increase

enplanements and lower average airfares.

The goal of this proposal is to assist in recruiting a price aggressive low-fare carrier to the

community, namely Frontier JetExpress. Airport officials have met with Frontier Airlines executives

and are moving forward towards gaining service to Denver. As Frontier looks to expand service

in the face of new competition from Southwest Airlines in Denver, markets such as Sioux Falls can

provide added value for Frontier while bringing substantially lower fares to the community. This

can be accomplished with the continued success of United Express service to Denver in mind.

The Sioux Falls Airport feels that there may be up to four times the number of passengers in the

Sioux Falls market as exist today…but only with the introduction of substantive low fare service.

Documents

Sioux Falls Regional Airport, South · PDF fileIn Support of Frontier Airlines Service to/from Denver ... Please provide a brief synopsis ... Airport management believe this new service