Chicago Rockford International Airport / Rockford, Illinois

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Docket: DOT-OST-2009-0149

Before the Office of the Secretary of Transportation

U.S. Department of Transportation

Chicago Rockford International Airport / Rockford, Illinois

Proposal Under the Small Community Air Service Development Program

An Integrated Program of New Service Development via;

Advertising/Marketing and Revenue Guarantees In Support of Low

Cost Service to/from New York City, Washington, DC, Los Angeles,

Dallas/Ft. Worth, Atlanta, and/or Minneapolis/St. Paul

Sponsor: Chicago Rockford International Airport

Robert O’Brien, Jr., AAE, Executive Director Greater Rockford Airport Authority

Congressional Code: IL-016

Dun & Bradstreet Number: 074572462

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Table of Contents

Description Page number

Table of Contents 2

Introductory Letters of Support 3

Summary Information 5

Introduction 8

Primary Objectives of Proposal 9

Executive Summary 10

Detailed Explanation of Proposal 17

Air Service Deficiencies 21

Market Specific Data 28

Current Air Service 45

Extenuating Factors Affecting Air Service 49

Availability of Alternate Airports 52

Use of Local / Federal Funds 53

Public / Private Partnerships 55

Local Air Service Development Efforts 56

In-kind Services from the Community 57

Performance Measures 57

Financial Controls 58

Return on Investment 58

DOT Exit Strategy 58

Alternate Plan 59

Airport Information 60

Community Profile 61

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Summary Information

Small Community Air Service Development Program Docket DOT-OST-2009-0149

A. Applicant Information

Not a Consortium Community now receives EAS subsidy Interstate Consortium Intrastate Consortium

Community previously received a Small Community Grant

If previous recipient, expiration date of grant: ______September 13, 2008______

Community Name Greater Rockford Airport Authority

Address 60 Airport Drive

City, State, Zip-code Rockford, Illinois 61109-2902

Point of Contact Robert O’Brien, Jr., Executive Director

Phone 815.969.4000

Fax 815.969.4001

Email bob@flyrfd.com

County Winnebago

Congressional Code IL-016

Dun & Bradstreet # 074572462 Designated Legal Sponsor:

Name Robert O’Brien, Jr.

Title Executive Director, Greater Rockford Airport Authority

Address 60 Airport Drive

City, State, Zip-code Rockford, Illinois 61109-2902

Phone: 815.969.4000

Fax: 815.969.4001

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B. Public/Private Partnership

Public:

1. Greater Rockford Airport Authority 2. City of Rockford

3. Winnebago County 4. City of Loves Park

5. Village of Machesney Park Private:

1. Rockford Area Economic Development Council 2. Rockford Area Chamber of Commerce

3. Rockford Area Convention and Visitors Bureau

C. Project Proposal

Marketing Upgrade Aircraft New Route

Personnel Increased Frequency Low Fare Service

Travel Bank Service Restoration Subsidy

Surface Transportation Regional Service Other (specify)

Revenue Guarantee Launch New Carrier

Start Up Cost Offset First Competitive Service

Study Secure Additional Carrier

D. Existing Landing Aids at Airport

Full ILS Outer/Middle Marker Published Instrument Approach

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E. Project Cost

Federal amount requested: $ 500,000

Total local financial contribution: $ 0

Airport funds: $ 350,000

Non-Airport funds: $ 100,000

State financial contribution: $ 0

Existing funds: $ 0

New funds: $ 0

Airport In-kind contribution: $ 50,000

(Fee waivers for first year: terminal rent, landing fees, apron rent, gate rent)

Other In-Kind Contribution: $ 50,000

Total cost of project: $ 1,050,000

F. Enplanements at Airport

2002: 560 2003: 640 2004: 690 2005: 15,725 2006: 81,710 2007: 101,860 2008: 88,160

G. Is Application Subject to Review by State Under Executive Order 12372

Process?

This application was made available to the State on ______.

Program is subject to review, but has not been selected by the State. Program is not covered.

H. Is Applicant Delinquent on any Federal Debt?

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Introduction

Rockford is at the center of north central Illinois. Although it is 90 miles from Chicago, it is often considered a “satellite” community. This causes the Rockford area to be overlooked. It is no different with prospective airlines. Air carriers have long overlooked Rockford, despite an immediate population of almost 700,000, because they have felt they are effectively serving the Rockford area through the airports in Chicago. Recent air service development efforts in Rockford have proven this theory wrong.

The Chicago Rockford International Airport has been one of the most aggressive in the country in recruiting new and additional air service. In the last four years, the Airport has recruited close to ten new routes. From virtually no air service in the early part of the decade, to seven non-stop routes today, the Airport has found its niche in offering convenient, low-cost service to residents in northern Illinois. In 2005, the Chicago Rockford International Airport captured just 31,450 total origin and destination passengers. By 2008 that number had jumped to more than 176,000 passengers – an increase of more than 460%.

The Chicago Rockford International Airport offers airlines some of the highest average load factors of all airports in the country. In 1999 the average load factor – the percentage of seats filled – on Rockford flights was 61%. By 2008, that number had risen to an all-time market high of 89%. In seven of the last eight years, load factors in Rockford have topped 80%.

Business travel connectivity in the Rockford market is more than limited – it is almost impossible. The Airport has proven that non-stop low fare service works, and that the market can fill aircraft doing this type of flying. The Chicago Rockford International Airport proposes to use this model for new air service to major business centers. Namely, the Airport is working to recruit low fare service to six key business destinations: New York/Newark, Washington, DC, Los Angeles, Dallas/Ft. Worth, Atlanta, and Minneapolis/St. Paul.

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Primary Objectives of Proposal

Objectives for Program:

 Build upon the success of the low cost model at the Chicago Rockford

International Airport

o Leisure service at low fares extremely popular and well supported in Rockford

 Apply that model to the Airport’s major business travel markets

o Rockford to New York/Newark

o Rockford to Washington, DC o Rockford to Los Angeles o Rockford to Dallas/Ft. Worth o Rockford to Atlanta

o Rockford to Minneapolis/St. Paul

 Bring low cost business service to the Airport Means to Achieve Objectives:

 Reduce airline’s barrier to entry through a full risk mitigation program

 Provide fee waivers and rent abatements to carriers on targeted business routes  Provide a revenue guarantee where risk warrants more aggressive mitigation  Provide a wide-scale marketing and advertising program for each new route,

covering, not only, the Rockford area, but also the western Chicago suburbs Course of Action to Support Means:

 Work diligently to prove markets exist

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Executive Summary

Rockford is at the center of north central Illinois. It sits a 1:40 drive from the Chicago “loop,” not taking into account traffic or weather conditions. Although it is 90 miles from Chicago, it is often considered a “satellite” community. This causes the Rockford area to be overlooked. It is no different with prospective airlines. Air carriers have long overlooked Rockford because they have felt they are effectively serving the Rockford area through the airports in Chicago. Recent air service development efforts in Rockford have proven this theory wrong.

The Chicago Rockford International Airport’s immediate catchment area covers all those who live within 30 minutes of the Airport. Even in this tightly defined area (seen in light green) – where all residents are within 30 miles – the population is more than 685,000 (see Table 1). This area has grown by 5.5% since 2000, adding 35,500 new residents.

Table 1:

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Low fare service at the Chicago Rockford International Airport tends to draw passengers from a larger area. This extended catchment area covers most of northern Illinois, from the western Chicago suburbs to the Iowa border. This larger area is home to more than 3 million people. Still, for the purposes of this proposal, only those who live in the immediate Rockford catchment area are taken into account, as to ensure any and all projections are conservative in nature. It is essential not to overstate a market in making the case for new service.

The Chicago Rockford International Airport is currently served by two carriers with scheduled service, and another charter operator with regular service. Allegiant Air has less-than-daily service from Rockford to Las Vegas, Orlando/Sanford, St. Petersburg/Tampa, and Phoenix/Mesa (see Table 2). DirectAir has current service on a less-than-daily basis to Punta Gorda and Myrtle Beach. Meanwhile, Apple Vacations has seasonal winter service from Rockford to Cancun.

Table 2:

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The Chicago Rockford International Airport has been one of the most aggressive in the country in recruiting new and additional air service. In the last four years, the Airport has recruited close to ten new routes. From virtually no air service in the early part of the decade, to seven non-stop routes today, the Airport has found its niche in offering convenient, low-cost service to residents in northern Illinois.

The Airport’s origin and destination passengers have grown considerably in the past four years on that increase in low cost service. In 2005, the Chicago Rockford International Airport captured just 31,450 total origin and destination passengers (see Table 3). By 2008 that number had jumped to more than 176,000 passengers – an increase of more than 460%.

Table 3: 31,450 163,420 203,720 176,320 0 50,000 100,000 150,000 200,000 2005 2006 2007 2008

$119

$112

$112

$111

Domestic US Origin & Destination Passengers and Average Fares

2005 – 2008

While passengers have grown almost five-fold in the last four years in Rockford, airfares have held relatively steady. In 2005, the average on way fare at the Chicago Rockford International Airport was $119 (see Table 3). By 2008, the average one way fare had fallen just $8, to $111. With fares remaining over $220 roundtrip, Chicago Rockford International Airport still ranks as a

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more expensive option than Chicago Midway – where the average roundtrip fare was $186 in 2008.

The market for the Chicago Rockford International Airport has seen vast swings in available seats and total onboard passengers in the last ten years. In 1999, airlines in the market provided more than 190,000 total available seats (see Table 4). By 2002 that number had fallen to less than 12,000 total available seats. After hard work by the Airport, more airline seats were infused into the market beginning in 2005 and peaking in 2007 with 266,700 total available seats. From 1999 to 2002, the Airport lost 93% of its available seats. Then, by 2007, the market gained 220% more available seats – with total available seats in 2008 15% above the number of seats offered in 1999.

Table 4:

Seats Available and Onboard Passengers at Rockford

1999 – 2008 190,617 122,746 52,649 11,631 28,213 13,370 67,680 229,671 266,640 218,688 88,721 55,552 30,936 9,581 23,766 10,991 41,444 186,685 223,250 189,421 0 50,000 100,000 150,000 200,000 250,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Available Seats Onboard Passengers

Rockford’s onboard passengers haven’t been tied to fare levels or levels of base demand. Instead, they have been closely tied with the number of available seats. In Rockford, if an airline puts seats into the market, historical data shows those seats get filled. Onboard passengers in the market have grown from less than 10,000 in 2002 to more than 189,000 in 2008 (see Table 4). Growth might have been more impressive had airlines not pulled back some seats from 2007 to 2008.

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The Chicago Rockford International Airport offers airlines some of the highest average load factors of all airports in the country – further illustrating the demand for additional service. In 1999 the average load factor – the percentage of seats filled – on Rockford flights was 61% (see Table 5). By 2008, that number had risen to an all-time market high of 89%. In seven of the last eight years, load factors in Rockford have topped 80%.

Table 5:

Load Factor Trend at Rockford

1999 – 2008

61%

54%

65%

86%

84%

80%

72%

82%

85%

89%

45%

55%

65%

75%

85%

95%

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Still, the Rockford market is challenged by the fact that all of its service it offered to leisure destinations. While the Airport currently serves as an excellent vacation alternative in northern Illinois, it does not adequately serve the business community of the region. Connectivity to business destinations, such as New York and Washington, DC, is almost non-existent.

In 2008, the Chicago Rockford International Airport boarded at least 30 passengers per day each way to four destinations: Las Vegas, Orlando-Sanford, St. Petersburg/Tampa, and

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Phoenix-Mesa (see Table 6). However, despite known demand for service from the region to major business destinations such as New York and Washington, DC, neither of those cities show-up on Rockford’s list of top 20 origin and destination cities. Only leisure destinations have significant passenger boardings in the most recent full year data.

Table 6: 49,770 45,510 30,940 21,710 9,570 9,400 1,720 760 320 320 290 280 250 240 220 170 170 130 120 120 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 Sanford Las Vegas St. Petersburg Phoenix-Mesa Denver Ft. Lauderdale Laughlin Phoenix Salt Lake City Reno Los Angeles Sacramento Santa Barbarba Seattle Albuquerque Ontario Austin Fresno Bakersfield Bozeman

Rockford’s Top 20 US O&D Passenger Markets

Calendar Year 2008

Beyond Rockford’s top seven passenger markets in 2008, there were very few enplanements to any of the other 13 markets in the top 20 (see Table 6). All of those who traveled from Rockford to other destinations were forced to make their own connections, using low cost, less-than-daily service to a leisure city, then transferring to a separate ticket on another carrier to their final destinations.

Business travel connectivity in the Rockford market is more than limited – it is almost impossible. The Airport has proven that non-stop low fare service works, and that the market can fill aircraft doing this type of flying. The Chicago Rockford International Airport proposes to use this model for new air service to major business centers. Namely, the Airport is working to recruit low fare service to six key business destinations: New York/Newark, Washington, DC, Los Angeles, Dallas/Ft. Worth, Atlanta, and Minneapolis/St. Paul.

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It has been difficult for the Airport to recruit additional airlines to the Rockford market because of the lack of significant historical traffic data. Data in Rockford is incomplete, and only shows demand to leisure destinations that are served non-stop. Other demand is currently being suppressed through the lack of local service, and served in a limited fashion through other Chicago area airports. Due to weaker traffic data, the Airport must be able to offer some kind of risk mitigation to convince an airline to invest in one of the Airport’s targeted routes. Rockford is stuck in a situation where it must recruit additional airlines in order to ensure the market’s continued viability, but it cannot recruit that competition with some kind of federal support to reduce a new airline’s barriers to entry into the market.

This proposal will illustrate that there is, indeed, a market for non-stop service to key business destinations from the Chicago Rockford International Airport. This data will be shared with prospective airlines, along with the Airport’s most aggressive cost abatement and revenue guarantee program.

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Detailed Explanation of Proposal

The Chicago Rockford International Airport proposes to continue its discussions with a collection of low cost carriers with the potential to provide non-stop service to specifically targeted large business destinations. The Airport proposes to use funding under the Small Community Air Service Development Program as part of its revenue guarantee program for new service.

The Airport has targeted a collection of six cities, which are among the largest generators of business travel demand from northern Illinois, for non-stop service. Those cities include New York/Newark, Washington, DC, Los Angeles, Dallas/Ft. Worth, Atlanta, and Minneapolis/St. Paul (see Table 7).

Table 7:

Proposed Routes from the Chicago Rockford International Airport

These routes have been chosen with input from a variety of sources. Local business travel data over the last several years has indicated significant demand to all six of these cities. At the same time, federal DOT data shows all six cities rank highly in terms of origin and destination passenger

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markets from the greater Chicagoland area. Moreover, in frequent conversations with prospective airlines, the Airport has found this collection of business destinations of most interest to those airlines with potential to launch new service. These airlines have indicated they would be willing to launch service on these routes should there be an adequate risk mitigation program in place to protect them against losses during the start-up phase.

The Rockford-Chicago-Milwaukee area produces more than 1,100 passengers per day each way to and from all six of the targeted markets. New York LaGuardia ranks as the top 2008 passenger market from the region, with an average of 2,600 passengers per day each way to and from all the region’s airports (see Table 8).

Table 8:

2008 Top 20 US O&D Passenger Markets from Chicago Area Airports *

* Includes Rockf ord, O’Hare, Midway, and Milwaukee

1,901,370 1,761,170 1,676,070 1,561,100 1,459,260 1,399,080 1,390,780 1,126,110 1,115,070 1,108,750 1,081,750 1,056,350 1,048,670 967,340 926,870 851,010 793,770 793,200 765,110 760,190 2,604.6 2,412.6 2,296.0 2,138.5 1,999.0 1,916.5 1,905.2 1,542.6 1,527.5 1,518.8 1,481.8 1,447.1 1,436.5 1,325.1 1,269.7 1,165.8 1,087.4 1,086.6 1,048.1 1,041.4 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 New York LaGuardia

Las Vegas Orlando Los Angeles Phoenix Denver Atlanta Dallas/Ft. Worth Newark Philadelphia Minneapolis/St. Paul Boston San Francisco Washington National Tampa Ft. Lauderdale Baltimore Detroit Ft. Myers Kansas City

Annual Passengers PDEW

The Rockford-Chicago-Milwaukee market produced more than 2,400 passengers per day each way to and from Los Angeles, making it the region’s second largest of the targeted destinations in 2008 (see Table 8). Other large, targeted markets include Atlanta, which produced 1,905 passengers per day each way in 2008; Dallas/Ft. Worth, which produced 1,543 passengers per day each way in 2008; Newark, which produced 1,527 passengers per day each way in 2008; Minneapolis/St. Paul, which produced 1,482 passengers per day each way in 2008; Washington

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Reagan National, which 1,325 produced passengers per day each way in 2008; and Baltimore, which produced 1,087 passengers per day each way in 2008.

The current fares from airports in the Rockford region to these targeted destinations average $158 each way, or $316 roundtrip (see Table 9). These are not low fare markets. In many cases, the average fare on a low fare carrier from Rockford is likely to be much lower than the prevailing fares from O’Hare, Midway, and Milwaukee. The Rockford area’s average one way fare to New York LaGuardia in 2008 was $163 each way, or $326 roundtrip. At the same time the average fare from the Rockford area to Los Angeles was $185 one way, or $370 roundtrip.

Table 9: $163 $185 $132 $165 $168 $166 $156 $125 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180

New York LaGuardia

Los Angeles Atlanta Dallas/Ft. Worth Newark Minneapolis/St. Paul Washington National Baltimore

2008 Average One Way Fares from Chicago Area Airports* at Rockford’s Targeted Markets for New Service

* Includes O’Hare, Midway, Rockf ord, and Milwaukee

Average: $158

While it is assumed the Chicago Rockford International Airport would only capture a small portion of this business travel demand, with so many passengers traveling on the routes each day there is sufficient demand for that service to be successful. The Airport is targeting low fare carriers to serve the routes in an effort to ensure that leakage to Chicago area airports will be curbed, and to help reduce congestion in Chicago by serving as a reliever airport for those traveling from Chicago’s western suburbs.

The grant request is for $500,000 – the final piece of funding required to develop the Airport’s revenue guarantee for service on these targeted routes. The Airport has already raised $150,000 in community and in-kind funding, along with a commitment of $450,000 from the Airport, itself. The DOT is the smallest investor in this program. While Airport and local funding will go to the

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marketing campaign, landing fee abatement, and airport rental abatement, the federal funding will be used to provide risk mitigation in the first 12-months of service.

These key components will lower a new carrier’s cost of entering the market, and provide insurance to ensure profitability in the first year of new service. It’s highly likely this low cost model for business service will be immediately successful in Rockford, and that a large portion of the federal funding will be left unspent after 12-months of service. Moreover, the Airport believes that if average fares in Rockford are lowered to within a reasonable amount of those in Chicago, travelers who are making the drive to Chicago to access the national air transportation system will be able to afford to fly locally, reducing congestion not only on the freeways between the cities, but also on the infrastructure at both O’Hare and Midway.

If, for some unforeseen reason, service is not commenced in a timely manner by a carrier on any of the targeted routes, the Chicago Rockford International Airport proposes to use federal grant money awarded under the Small Community Air Service Development Program to help reduce the barrier to entry for a legacy carrier interested in beginning service to the community. The Airport has had previous discussions with a number of airlines that have considered launching service to Rockford. The Airport would revisit these discussions with legacy and regional airlines, using Grant money as a revenue guarantee to guard against losses in the new market.

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Air Service Deficiencies in Rockford and Northern Illinois

In order to better understand the demand for air travel from the Chicago Rockford International Airport one has to look beyond the local passenger data from the last several years, and, instead, view the market as a part of the regional air travel landscape. Without network service in Rockford, the enplanement numbers from 2008 underestimate local demand for air service. Much of this demand is currently being served, albeit inefficiently, from Chicago’s airports, and to a lesser extent, from Milwaukee’s airport. In other words, the Airport is leaking a large percentage of its passengers to other airports – even though those airports are not particularly close.

The Rockford metropolitan statistical area (MSA) had a population of 455,928 as of the latest US Census estimates (see Table 10). The larger region comprised of the metro areas of Chicago, Milwaukee, and Rockford has a current population of 11,997,782.

Table 10:

Regional Population

Source: US Census Share of Population of Combined RFD/ORD/MDW/MKECatchment

Chicago (ORD and MDW) 9,793,036 81.6%

Milwaukee (MKE) 1,748,818 14.6% Rockford (RFD) 455,928 3.8% Population Share ORD MKE MDW RFD

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Rockford’s share of the regional population is 3.8% (see Table 10). In many markets, an Airport draws a number of passengers proportional to its overall population in the region. If that were to be the case in the Rockford market, one could reasonably expect the Airport to retain about 4% of the total passengers using all airports in the larger region. However, in the case of Rockford, the Chicago Rockford International Airport does not retain anywhere close to 4% of the region’s passengers.

While the Rockford MSA is home to 4% of the region’s total residents, its airport retains just 0.4% of the region’s total origin and destination passengers (see Table 11). In the region, Rockford has the lowest share of passenger retention of any airport. In 2008, the Chicago Rockford International Airport saw a total of 176,320 origin and destination passengers. If the Airport had been able to retain the number of regional passengers proportional to its share of population in the region, it would have been used by another 1,497,318 passengers. In effect, the Chicago Rockford International Airport “leaked” these passengers to other airports in the region – a leakage rate of 89.5%. The bottom line is that the Chicago Rockford International Airport only retains about a 10% of the passengers that should be expected based on its share of the regional population.

Table 11:

Population Share US Census Estimates 2008

O&D Passenger Share Calendar Year 2008 Chicago 81.6% Milwaukee 14.6% Rockford 3.8% Chicago 86.7% Milwaukee 12.9% Rockford 0.4%

Source: US Census Share of Population of Combined RFD/ORD/MDW/MKECatchment

The largest beneficiary of Rockford’s passenger leakage is Chicago – at both O’Hare and Midway. Together, the Chicago airports had “reverse leakage” in 2008, when they drew 6.3% more passengers than their proportion of the regional population. While Chicago makes-up 81.6% of the region’s population, its airports board 86.7% of the region’s total origin and destination passengers (see Table 11). If Chicago airports retained a number of origin and

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destination passengers proportional to their regional population share, they would be expected to generate 35.9 million passengers annually. In 2008, the Chicago airports saw a total of 38.2 million O&D passengers – more than 6% above their regional share. Many of those passengers likely came at the expense of the Chicago Rockford International Airport.

Another way of determining the true size of the Rockford market is by comparing the economy of the Rockford area to the economies of the nearest cities with commercially-served airports. The easiest way to gauge each catchment area’s contribution to the economy of the region is to compare the gross metropolitan products (GMP) of each. A GMP is much like a gross national product – an overall gauge of economic activity in an area in dollars earned. The United States Council of Mayors reports the Rockford metro area (MSA) produced a GMP of $12.4 billion in 2008, which represented 2.1% of the total gross regional product (GRP) of the area including Chicago, Milwaukee, and Rockford (see Table 12).

Table 12:

Source: United States Council of Mayors, June 2008

Chicago (ORD and MDW) $506.1 Billion 84.6%

Milwaukee (MKE) $79.5 Billion 13.3%

Rockford (RFD) $12.4 Billion 2.1% ORD MKE MDW RFD GMP Share

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Chicago generated the largest portion of the GRP, with more than $506.1 billion, or 84.6%, while Milwaukee produced a GMP of $79.5 billion – good for 13.3% of the GRP (see Table 12).

Despite producing more than 2% of the total gross regional product (GRP), the Chicago Rockford International Airport retains just 0.4% of the region’s total origin and destination passengers (see Table 13). In the region, Rockford has the lowest share of passenger retention relative to its gross metro product (GMP), of any airport.

In 2008, the Chicago Rockford International Airport generated a total of 176,320 origin and destination passengers (see Table 13). If the Airport had been able to retain the number of regional passengers proportional to its share of the GRP, it would have been used by another 736,924 passengers. In effect, the Chicago Rockford International Airport “leaked” these passengers to other airports in the region – a leakage rate of 80.7%. The Airport retains less than 20% of the passengers that should be expected based on its share of the gross regional product.

Table 13:

Gross Metropolitan Product Share US Council of Mayors 2008

O&D Passenger Share Calendar Year 2008 Chicago 84.6% Milwaukee 13.3% Rockford 2.1%

Source: United States Council of Mayors

Chicago 86.7% Milwaukee 12.9% Rockford 0.4%

The main beneficiaries of Rockford’s passenger leakage, based on GRP, are, again, Chicago’s airports. The Chicago airports experienced “reverse leakage” in 2008, when O’Hare and Midway drew 2.5% more passengers than their proportion of the gross regional product (GRP). While Chicago generates 84.6% of the GRP, its airports board almost 87% of the region’s total origin and destination passengers (see Table 13). If Chicago retained a number of origin and destination passengers proportional to its GRP share, it would be expected to generate 37.3

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million passengers annually. In 2008, the airports in Chicago saw a total of 38.2 million O&D passengers – almost 3% above their projected GRP share.

It has been established that the Chicago Rockford International Airport is losing a significant number passengers from its catchment area. Attention then turns to the reasons why travelers are driving to other airports. As is the case with many other airports experiencing leakage, it all comes down to the availability of flights on the right airlines at the right times.

Airlines that serve the Chicago Rockford International Airport offer far fewer seats available for sale in Rockford than they do at other adjacent airports in the region. Airlines offered just over 218,688 total available seats in the Rockford in 2008 (see Table 14). In 2008, airlines offered 336 times the available seats at Chicago O’Hare that they offered in Rockford.

Table 14:

73,485,944

24,420,045

10,508,999

218,688

0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000

ORD

MDW

MKE

RFD

Available Outbound Seats

Calendar Year 2008

The lack of sufficient available seats for sale in the Rockford market forces many travelers to drive to other airports to access the national air transportation system. The small number of available seats at the Chicago Rockford International Airport in 2008 is partially responsible for the Airport’s inability to retain a number of origin and destination passengers proportional to its population and gross metropolitan product. With fewer available seats and higher average fares, there isn’t much incentive for Rockford travelers to fly from their hometown airport, other than its convenience. In many cases, the convenience does not outweigh the greater flight offerings and lower fares at other airports in the region.

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Using the most conservative of these projections – the projection based on the region’s gross metropolitan product (GMP) – the Rockford metropolitan statistical area (MSA) likely generated roughly 924,880 total origin and destination passengers in 2008 (see Table 15). This number is the Rockford GMP share, 2.1%, of the total passenger traffic in 2008 at Rockford, Chicago O’Hare, Chicago Midway, and Milwaukee, which totaled 11,997,782 passengers (both inbound and outbound). Table 15: 891,262 922,436 844,097 832,864 858,027 923,854 963,268 986,250 1,002,576 924,880 500,000 600,000 700,000 800,000 900,000 1,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Estimated US Origin & Destination Passengers/Share of Regional Traffic

1999 – 2008

Applying this formula to the total passengers for the region over the last ten years, a trend of local Rockford area passenger traffic can be developed. This trend shows the Rockford market likely produced in excess of 830,000 total origin and destination passengers in each year since 1999 (see Table 15). Moreover, the trend shows that since the downturn after 2002, the Rockford passenger market has likely grown in excess of 11%.

A similar trend can be seen looking at airline revenues in the region, and applying the same formula to determine the local, Rockford share. In order to determine what kind of airline revenue the Rockford MSA generates, the Airport multiplied total revenue from the region by the 2.1% share the Rockford market would generate, should airline revenue resemble the market’s

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GMP share (see Table 16). This projection is much more conservative than the population share projection would have been. Using this method, it is estimated that the Rockford MSA generated in excess of $140 million in total airline revenue in 2008 – generated through the airports at Chicago and Milwaukee. Total revenues in the Rockford MSA are estimated to have grown by more than 38% since 2002.

Table 16: 139,315,972 149,292,225 124,707,789 110,107,854111,536,377 115,801,625 121,853,337 133,686,663136,367,837 140,568,551 75,000,000 85,000,000 95,000,000 105,000,000 115,000,000 125,000,000 135,000,000 145,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Estimated US Origin & Destination Revenue/Share of Regional Revenue

1999 – 2008

With more than $140 million in conservatively estimated airline revenue, and more than 920,000 annual airline origin and destination passengers, it is clear the Rockford market is large enough to support local airline service. But, in order to convince an air carrier that these numbers do reflect the actual market, it will likely take a significant revenue guarantee to cover that airline’s risk in launching service. This project will eliminate a new airline’s risk in expanding service by offering marketing support, while at the same time providing revenue guarantees to ensure the route has time to win over passengers from other airlines.

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Market Specific Data: Chicago Rockford to New York/Newark

Chicago Rockford International Airport data shows the community’s top unserved market is New York/Newark. The route from Rockford to Newark would cover 781 miles – a flight of 1:37 assuming an average groundspeed of 420 knots (see Table 17). The route from Rockford to New York’s Kennedy Airport would cover 802 miles – a flight of 1:40 assuming an average groundspeed of 420 knots. A third option, a route from Rockford to LaGuardia would cover 795 miles – a flight of 1:39 assuming an average groundspeed of 420 knots.

Table 17:

Proposed Route: Rockford – New York/Newark

While the route from Chicago Rockford International Airport to Newark is the shortest of the three options, any of the New York area airports would serve the Rockford region well – even the secondary airports such as Islip, Newburgh, and White Plains. The demand between the Chicago Rockford International Airport and the New York/Newark area is so robust, even at relatively high local fares it is believed low fare service would be supported on the route to virtually any New York area airport.

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For the purposes of better understanding the local market between the Chicago Rockford International Airport and New York/Newark the Airport used the same market estimation techniques as explained in the previous section of this proposal. It is assumed the Chicago Rockford International Airport is responsible for a similar ratio of origin and destination passengers as its ratio of local gross metropolitan product (GMP) to the gross regional product (GRP) of the area including Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and New York LaGuardia, New York Kennedy, Newark, and Islip.

Under this projection, which is much more conservative than a similar projection based on population ratios, the Chicago Rockford International Airport market was estimated to produce more than 74,700 total origin and destination passengers to the New York/Newark area in 2008, or 102.4 passengers per day each way (see Table 18). This number is conservative, and represents enough local passengers to fill two daily regional jets on the route with no additional passenger stimulation. Table 18: 66,436 66,245 60,140 63,589 64,832 69,327 73,414 81,501 85,947 74,784 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 80,000 85,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $189 $211 $187 $150 $150 $146 $137 $131 $123 $159 Estimated O&D Passengers and Average Fares Between the Rockford Area* and the New York/Newark Area*

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Total estimated passengers between Rockford and New York/Newark have grown by 24% since 2001, as the average one way fare on the route has dropped by 25% over the same period (see Table 18). Still, the average one way fare in 2008 between airports in the Rockford area and airports in the New York/Newark area was not a discount fare, averaging $159 each way, or $318 roundtrip. A “low fare” model between Rockford and a New York area airport, with a fare as high as $275 roundtrip, would still offer significant savings over current fare levels in the region. The Airport believes there is sufficient passenger traffic and revenue to make Rockford – New York/Newark service profitable. A new airline would not be forced to offer rock-bottom fares in Rockford to be competitive.

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Market Specific Data: Chicago Rockford to Los Angeles

The next strongest potential route, in terms of estimated origin and destination passengers from the Chicago Rockford International Airport is Los Angeles. The route from Rockford to Los Angeles International (LAX) would cover 1,686 miles – a flight of 3:29 assuming an average groundspeed of 420 knots (see Table 19). The route from Rockford to Ontario International Airport would cover 1,642 miles – a flight of 3:24 assuming an average groundspeed of 420 knots. A third option, a route from Rockford to Long Beach would cover 1,678 miles – a flight of 3:28 assuming an average groundspeed of 420 knots.

Table 19:

Proposed Route: Rockford – Los Angeles

While the route from Chicago Rockford International Airport to Ontario is the shortest of the options, Los Angeles International would likely offer the best performance, as it sits closer to most of the high demand destinations in the LA Basin.

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For the purposes of better understanding the local market between the Chicago Rockford International Airport and the LA Basin the Airport used the same market estimation techniques as explained in the “air service deficiencies” section of this proposal. It is assumed the Chicago Rockford International Airport is responsible for a similar ratio of origin and destination passengers as its ratio of local gross metropolitan product (GMP) to the gross regional product (GRP) of the area including Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and the LA Basin airports of LAX, Ontario, Long Beach, Santa Ana/Orange County, and Burbank.

Under this projection, which is more conservative than a similar projection based on population ratios, the Chicago Rockford International Airport market was estimated to produce more than 48,000 total origin and destination passengers to the Los Angeles area in 2008, or 65.8 passengers per day each way (see Table 20). This number is conservative, but it still represents a 54% load factor on a high density Airbus A319 aircraft, or a high density Boeing 737-700 aircraft – without taking into account any non-stop stimulation on the route, which would likely average 75% or higher. Table 20: 44,347 47,399 45,235 46,211 48,242 51,856 50,573 50,598 52,226 48,058 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $205 $201 $175 $149 $146 $139 $154 $167 $170 $182 Estimated O&D Passengers and Average Fares Between the Rockford Area* and the Los Angeles Area*

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Total estimated passengers between Rockford and the Los Angeles basin have grown by 8.5% since 1999, as the average one way fare on the route has dropped by 11% over the same period (see Table 20). Still, the average one way fare in 2008 between airports in the Rockford area and airports in the Los Angeles area was not low, averaging $182 each way, or $364 roundtrip. A “low fare” model between Rockford and a Los Angeles area airport, with a fare as high as $315 roundtrip, would still offer significant savings over current fare levels in the region.

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Market Specific Data: Chicago Rockford to Washington, DC

Relatively high average fares continue to suppress passenger traffic between Chicago area airports and Washington, DC. Lower fare service from the Chicago Rockford International would, not only, provide an excellent alternative to service provided at O’Hare, Midway, and Milwaukee, but also help to stimulate passengers that are likely deferring trips to the high average cost on the relatively short stage length. The route from Rockford to Washington Reagan National would cover 675 miles – a flight of 1:24 assuming an average groundspeed of 420 knots (see Table 21). The route from Rockford to Dulles International Airport would cover 651 miles – a flight of 1:21 assuming an average groundspeed of 420 knots. A third option, a route from Rockford to Baltimore Washington (BWI) would cover 685 miles – a flight of 1:25 assuming an average groundspeed of 420 knots.

Table 21:

Proposed Route: Rockford – Washington, DC

Any of the Washington, DC area airports would serve Rockford-Chicago-Milwaukee travelers well. With access to Washington Reagan National extremely limited due to slot constraints the Airport does not expect to find an airline willing to operate to that DC terminal. Instead, service

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is most likely to be provided to Baltimore/Washington, followed in likelihood by Washington Dulles.

For the purposes of better understanding the local market between the Chicago Rockford International Airport and the Washington, DC area the Airport used the same market estimation techniques as explained in the “air service deficiencies” section of this proposal. It is assumed the Chicago Rockford International Airport is responsible for a similar ratio of origin and destination passengers as its ratio of local gross metropolitan product (GMP) to the combined gross regional product (GRP) of Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and the DC area airports including National, Dulles, and BWI.

Under this projection, which is more conservative than a similar projection based on population ratios in northern Illinois and southern Wisconsin, the Chicago Rockford International Airport market was estimated to produce more than 46,700 total origin and destination passengers to the Washington-Baltimore area in 2008, or 64 passengers per day each way (see Table 22).

Table 22: 45,434 45,965 40,164 38,968 40,709 46,011 49,155 47,904 52,207 46,728 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $129 $138 $136 $135 $132 $119 $108 $122 $113 $143 Estimated O&D Passengers and Average Fares Between the Rockford Area* and the Washington, DC Area*

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Total estimated passengers between Rockford and the Washington, DC area have been suppressed by 11% in just the last year on an average fare that’s increased by 26% in the same period (see Table 22). Still, passengers on the route have grown by 20% since 2002, despite the average one way fare on the route increasing by 6% over the same period (see Table 22). The average one way fare in 2008 between airports in the Rockford area and airports in the Washington-Baltimore area was $143 each way, or $286 roundtrip (see Table 22). The average fare between Chicago area airports and the DC area is as it highest point in the last decade. This high average fare is the main reason passengers on the route fell in 2008, and will likely continue to fall through the end of 2009.

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Market Specific Data: Chicago Rockford to Atlanta

The number of estimated origin and destination passengers traveling between Rockford and Atlanta has held relatively steady despite airfares that have risen by almost a third in just the last three years. The steady demand is an indication of a strong business market, with travelers whose plans are not easily influenced by fare fluctuations, or high fares in general.

A non-stop route from Rockford to Atlanta would cover 643 miles – a flight of 1:20 assuming an average groundspeed of 420 knots (see Table 23). This short route has been a strong performer from Chicago area airports over the last decade, producing average yields above 20 cents a seat mile for each of the last four years.

Table 23:

Proposed Route: Rockford – Atlanta

For the purposes of better understanding the local market between the Chicago Rockford International Airport and Atlanta the Airport used the same market estimation techniques as explained in the “air service deficiencies” section of this proposal. It is assumed the Chicago Rockford International Airport is responsible for a similar ratio of origin and destination passengers

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as its ratio of local gross metropolitan product (GMP) to the combined gross regional product (GRP) of Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and Atlanta.

Under this projection, which is more conservative than a similar projection based on population ratios in northern Illinois and southern Wisconsin, the Chicago Rockford International Airport market was estimated to produce more than 29,200 total origin and destination passengers to Atlanta in 2008, or 40 passengers per day each way (see Table 24).

Table 24: 31,719 31,481 27,454 27,392 28,853 29,654 28,984 29,922 30,358 29,206 15,000 17,000 19,000 21,000 23,000 25,000 27,000 29,000 31,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $122 $143 $146 $124 $102 $103 $122 $136 $136 $132 Estimated O&D Passengers and Average Fares Between the Rockford Area* and Atlanta

* Rockf ord Area Includes 2.1% of Passengers f rom ORD/MDW/MKE/RFD to ATL

Despite average fares that have been quite changeable over the last ten years, passengers between the Rockford area and Atlanta have held relatively steady. Overall, passengers are down 8% since 1999, but the average fare has increased by 8% in that same time period (see Table 24). It is anticipated that non-stop service between Rockford and Atlanta would further stimulate what has been a stagnant local market, even with fare levels similar to the average fare in 2008 between the Chicago-Rockford-Milwaukee area and Atlanta.

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Market Specific Data: Chicago Rockford to Dallas/Ft. Worth

Perhaps no other market outside of Rockford – Dallas/Ft. Worth has been a better indicator of what lower fares do for passenger traffic in northern Illinois and southern Wisconsin. The market saw large decreases in the average fare between the regions from 2000 to 2007, causing a large spike in origin and destination passengers. But in 2008, fares have gone up again, quickly suppressing passengers back to 2000 levels.

A non-stop route from Rockford to Dallas/Ft. Worth International Airport would cover 775 miles – a flight of 1:36 assuming an average groundspeed of 420 knots (see Table 25). A route between Rockford and Dallas’ Love Field would cover 773 miles, on a flight of 1:36, with the same assumptions.

Table 25:

Proposed Route: Rockford – Dallas/Ft. Worth

For the purposes of better understanding the local market between the Chicago Rockford International Airport and Dallas/Ft. Worth the Airport used the same market estimation techniques as explained in the “air service deficiencies” section of this proposal. It is assumed

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the Chicago Rockford International Airport is responsible for a similar ratio of origin and destination passengers as its ratio of local gross metropolitan product (GMP) to the combined gross regional product (GRP) of Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and Dallas/Ft. Worth.

Under this projection, which is more conservative than a similar projection based on population ratios in northern Illinois and southern Wisconsin, the Chicago Rockford International Airport market was estimated to produce more than 27,100 total origin and destination passengers to Dallas/Ft. Worth in 2008, or 37 passengers per day each way (see Table 26).

Table 26: 26,015 27,002 23,058 23,117 22,281 25,195 26,532 30,071 30,404 27,138 10,000 15,000 20,000 25,000 30,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $205 $215 $200 $173 $166 $155 $148 $136 $139 $162 Estimated O&D Passengers and Average Fares Between the Rockford Area* and the Dallas/Ft. Worth Area*

* Rockf ord Area Includes 2.1% of Passengers f rom ORD/MDW/MKE/RFD to DFW/DAL

In the last nine years, as average fares between the Rockford area and Dallas/Ft. Worth dropped by 37% - from an average of $215 each way in 2000 to an average of $135 each way in 2006 – the number of origin and destination passengers on the route grew by 18% - an addition of six passengers per day in each direction (see Table 26). Since, 2006, however, fares between the Rockford area and Dallas/Ft. Worth have gone up by 19%, or $26 each way, to an average of $162 each way. This fare increase has been at least partially responsible for a

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decline in origin and destination passengers. In the last year, estimated origin and destination passengers between Rockford and Dallas/Ft. Worth have fallen by 8%, representing a loss of four passengers per day each way on the route. Passengers between Rockford and Dallas/Ft. Worth in 2008 fell to their lowest point in four years due in part to the fare increase.

A service provided directly between Rockford and an airport in the Dallas/Ft. Worth area would likely stimulate additional passengers. The current local fare between the Chicago area and Dallas/Ft. Worth is $324 roundtrip. Non-stop service offered at $300 or less would likely have the impact of stimulating, at least, 25% more passengers on the route.

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Market Specific Data: Chicago Rockford to Minneapolis

A large increase in the average fare between the Chicago-Rockford-Milwaukee area and Minneapolis/St. Paul in just the last year has led to a huge drop in origin and destinations passengers on the route. This fare increase will continue to suppress passengers, unless lower fare service is available between the two regions.

A non-stop route from Rockford to Minneapolis/St. Paul would cover 278 miles – a flight of 35 minutes assuming an average groundspeed of 420 knots (see Table 27). This short route has been a strong performer from Chicago area airports over the last decade, but has been hurt by recent fare increases.

Table 27:

Proposed Route: Rockford – Minneapolis/St. Paul

For the purposes of better understanding the local market between the Chicago Rockford International Airport and Minneapolis/St. Paul the Airport used the same market estimation techniques as explained in the “air service deficiencies” section of this proposal. It is assumed the Chicago Rockford International Airport is responsible for a similar ratio of origin and

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destination passengers as its ratio of local gross metropolitan product (GMP) to the combined gross regional product (GRP) of Rockford, Chicago, and Milwaukee. Thus, it is assumed that the Chicago Rockford International Airport immediate metropolitan area is responsible for 2.1% of all passengers traveling between Chicago, Milwaukee, and Rockford and Minneapolis/St. Paul. Under this projection, which is more conservative than a similar projection based on population ratios in northern Illinois and southern Wisconsin, the Chicago Rockford International Airport market was estimated to produce more than 22,700 total origin and destination passengers to Minneapolis/St. Paul in 2008, or 31 passengers per day each way (see Table 28).

Table 28: 27,804 32,007 27,540 22,408 23,103 23,900 26,356 29,136 30,063 22,717 10,000 15,000 20,000 25,000 30,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $159 $133 $133 $147 $128 $129 $107 $103 $99 $166 Estimated O&D Passengers and Average Fares Between the Rockford Area* and Minneapolis/St. Paul

* Rockf ord Area Includes 2.1% of Passengers f rom ORD/MDW/MKE/RFD to MSP

Just two years ago, in 2007, the Rockford area is estimated to have produced a total of almost 30,100 origin and destination passengers to and from Minneapolis/St. Paul, or 41 passengers per day in each direction (see Table 28). Traffic on the route dropped by 11 passengers per day each way between 2007 and 2008 – a loss of 24% of estimated origin and destination passengers.

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It is likely that much of this passenger loss was caused by average fares on the route that spiked by 68% over the same time period – an increase of $67 each way in just one year (see Table 28). In 2007, the average fare between the Chicago-Rockford-Milwaukee area and Minneapolis/St. Paul was just $99 each way. By 2008 the average fare had risen to $166 each way, or $332 roundtrip. Additional low fare service at the Chicago Rockford International Airport would benefit the whole region, helping to make this essential business route more affordable.

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Current Service at Chicago Rockford International Airport

The Chicago Rockford International Airport has been one of the most aggressive in the country in recruiting new and additional air service. In the last four years, the Airport has recruited close to ten new routes. From virtually no air service in the early part of the decade, to seven non-stop routes today, the Airport has found its niche in offering convenient, low-cost service to residents in northern Illinois.

The Chicago Rockford International Airport is currently served by two carriers with scheduled service, and another charter operator with regular service. Allegiant Air has less-than-daily service from Rockford to Las Vegas, Orlando/Sanford, St. Petersburg/Tampa, and Phoenix/Mesa. DirectAir has current service on a less-than-daily basis to Punta Gorda and Myrtle Beach. Meanwhile, Apple Vacations has periodic winter service from Rockford to Cancun.

Despite the Airport’s success in the low cost leisure sector, it still serves far fewer passengers than an airport with an immediate catchment area the size of the Rockford metropolitan statistical area (MSA) would be expected to. Despite the fact the Rockford MSA is home to 3.8% of the region’s population, and produces 2.1% of the region’s total gross regional product (GRP), the Airport boards less than 0.5% of the region’s total passengers.

Current Passenger Traffic in Rockford

Despite gains in total passengers retained by the Chicago Rockford International Airport, the Airport still enplanes less than one half of one percent of the total passengers traveling in the region. That region includes the airports in Chicago – both O’Hare and Midway – and Milwaukee, in addition to Rockford.

In 2004, the Chicago Rockford International Airport enplaned just 0.003% of all passengers in the larger region, or 1,380 of the 43.9 million origin and destination passengers from all airports in the Rockford area (see Table 29). By 2008, that number had grown to 0.4% of all regional passengers enplaned by the Chicago Rockford International Airport, or a total of 176,320

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Rockford origin and destination passengers out of 43.9 million passengers from all airports in the region.

While the Chicago Rockford International Airport has grown its regional share of passengers by more than 1,300% in the last five years (see Table 29), it is still unable to board a proportion of passengers similar to its proportion of either population or gross regional product. While Rockford is home to 3.8% of the region’s population, and creates 2.1% of the gross regional product, it enplanes just 0.4% of the region’s total passengers.

Table 29: 57,580 46,590 16,090 1,120 1,280 1,380 31,450 163,420 203,720 176,320 42,383,450 43,878,930 40,178,990 39,659,080 40,857,150 43,991,680 45,838,440 46,800,870 47,538,000 43,865,590 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Current Rockford Share of Regional US Origin & Destination Passengers

Including O’Hare, Midway, Milwaukee, and Rockf ord

0.136% 0.106%

0.040% 0.003% 0.003% 0.003% 0.069%

0.349% 0.429% 0.402%

If Rockford had sufficient air service to retain a similar number of passengers to its proportion of the regional population, it could be reasonably expected to have retained 1.7 million origin and destination passengers in 2008 – a little more than 1.5 million more passengers than it actually retained during that year (see Table 29). If Rockford had a sufficient number of available seats to retain a number of passengers similar to its proportion of gross region product, it would have retained 921,000 origin and destination passengers in 2008 – 745,000 more passengers than it actually retained in 2008.

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Current Airline Revenue in Rockford

The Chicago Rockford International Airport retains an even smaller proportion of regional airline revenue than it does regional airline passengers, largely due to the fact that all service at the Airport is low fare leisure service, which does not command high business fares. Still, the Airport has been able to grow its regional proportion of revenue by an amazing 2,900% in the last five years – since 2004.

In 2004, the Chicago Rockford International Airport retained just 0.001% of all airline revenue in the larger region, or $59,000 of the $5.5 billion in origin and destination revenue from all airports in the Rockford area (see Table 30). By 2008, Rockford had retained 0.29% of all regional revenue earned by airlines serving the region, or a total of $19.6 million in Rockford origin and destination revenue out of $6.7 billion in revenue from all airports in the region.

Table 30: $7,882,590 $5,919,980 $1,998,270 $64,950 $56,080 $58,690 $3,755,160$18,315,250$22,902,690$19,567,620 $6,626,211,320 $7,103,233,570 $5,936,467,890 $5,243,166,170$5,311,199,950$5,514,304,400 $5,798,784,710 $6,347,716,300$6,470,803,820$6,674,172,880 $0 $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000 $5,000,000,000 $6,000,000,000 $7,000,000,000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0.119% 0.083% 0.034% 0.001% 0.001% 0.001% 0.065% 0.289% 0.354% 0.293% Current Rockford Share of Regional US Origin & Destination Revenue

Including O’Hare, Midway, Milwaukee, and Rockf ord

While the Chicago Rockford International Airport has grown its regional share of revenue by more than 29 times in the last five years (see Table 30), it is still unable to retain a proportion of revenue similar to its proportion of either population or gross regional product. While Rockford is

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home to 3.8% of the region’s population, and creates 2.1% of the gross regional product, it captures just under 0.3% of the region’s total airline revenue, as of 2008.

If Rockford had sufficient air service to retain a similar ratio of revenue to its proportion of the regional population, it could be reasonably expected to have retained $253.6 million in origin and destination revenue in 2008 – $234.0 million more airline revenue than it actually retained during that year (see Table 30). If Rockford had a sufficient number of available seats to retain a ratio of airline revenue similar to its proportion of gross region product, it would have retained $140.2 million in origin and destination revenue in 2008 –$120.6 million more in airline revenue than it actually retained in 2008.

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Extenuating Factors Affecting Air Service

There is another illustration of just how few seats are available at the Chicago Rockford International Airport, especially when considering how large the market is: the number of seats available per capita in 2008. Of the four adjacent airports in the Rockford area – O’Hare, Midway, Milwaukee, and Chicago Rockford International, itself – the Chicago Rockford International Airport has the fewest available airline seats per capita. In 2008, airlines serving the Chicago Rockford International Airport offered just 0.48 seats per resident of the Rockford metropolitan statistical area (see Table 31).

Table 31:

7.50

6.01

2.49

0.48

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00

ORD

MKE

MDW

RFD

Available Outbound Seats Per Capita

Calendar Year 2008

The number of seats per capita is an excellent data point for understanding how underserved non-hub and small-hub markets are. The data in this case illustrates how airlines have neglected the Rockford market, and forced residents of the Rockford metro area to seek out air service at other airports in the region.

With so few available seats in the Rockford market, it is no surprise that the Airport’s enplanements are well under the national average for origin and destination passengers per capita. In 2008, the Chicago Rockford International Airport generated just 0.42 passengers per

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residents of its metro area - 400% fewer than the national average of 2.1 passengers per capita (see Table 32). Table 32:

5.81

4.37

1.77

0.42

0.00 1.00 2.00 3.00 4.00 5.00

ORD

MKE

MDW

RFD

Onboard Outbound Passengers Per Capita

Calendar Year 2008

National Average: 2.10

The Chicago Rockford International Airport generated the fewest passengers per capita of all adjacent airports in 2008, producing 321% fewer origin and destination passengers per capita than Midway and 1,280% fewer O&D passengers per capita than O’Hare (see Table 32). Both O’Hare and Milwaukee generated more passengers per capita than the national average in 2008.

Although it may appear that the Rockford market doesn’t produce as many O&D passengers as other markets, that is not necessarily the case. The likely reality is that there aren’t enough seats to accommodate the demand for travel in the Rockford market, so many of those who live in the Rockford metro area are forced to drive to other airports to access the national air transportation system.

Airlines serving the Chicago Rockford International Airport simply don’t offer enough seats to satisfy local demand. And because, for so long, the Rockford market has been underserved, local residents are conditioned to expect to have to drive to other airports in the region to catch flights. Moreover, there is little incentive for Rockford’s incumbent airlines to offer additional

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flights, as they can fill the planes they fly into and out of the market, while earning a fare and yield premium for their scarce product.

The Chicago Rockford International Airport feels it must recruit a low cost business route that can provide additional lift, and additional local available seats. The Airport believes increased competition will lead to lower fares, through the addition of more available seats, more flights, and service that is more likely to compete on price and convenience with that found at other regional airports.

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Availability of Alternate Airports

Chicago’s O’Hare Airport is the closest alternate to the Chicago Rockford International Airport (see Table 33). O’Hare is a drive of 75 miles from Rockford’s city center, which takes an average of 1:30 without taking into account traffic conditions. Part of the drive from Rockford to O’Hare is on a toll road, increasing the cost of traveling from that airport.

Table 33: ORD MKE MDW RFD

Alternate Airports

Alternate Airports in Northern Illinois and Southern Wisconsin

Rockford’s second closest alternate airport is Milwaukee’s Mitchell International, which lies 93 miles to the northeast of Rockford’s city center (see Table 33). The drive from Rockford to Milwaukee is an hour and 42 minutes, in normal traffic.

Rockford’s closest low fare hub is an hour and 51 minute drive away, not taking into account heavy traffic, or the tolls on the highways, at Chicago’s Midway Airport. It is difficult to truly consider Midway an alternate as it is 97 miles from Rockford’s city center, and not a sufficient option for anyone living north and west of Rockford.

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Use of Local / Federal Funds

Airport Provided Marketing and Advertising

The Chicago Rockford International Airport proposes to spend at least $50,000 in its own funds on marketing and advertising promotions in support of new service, along with cash and in-kind contributions of $150,000 from the community. The goal is to increase ridership and usage through targeted regional campaigns. The campaign will include radio, newspaper, billboards, website, e-mail, social media, and regional business organizations. Marketing and advertising will commence as soon as new service is announced, and continue for one year beyond the launch date of service.

Airport Provided Ticketing/Above Wing Staffing

The Chicago Rockford International Airport proposes to spend at least $50,000 in its own funds on Airport-provided ticket counter staffing for the new carrier. The Airport will ensure staff is available to handle all new flights under this program.

Airport Provided Fee and Rent Waivers

The Chicago Rockford International Airport will commit to lowering the new carrier’s costs at the Airport in the first year of service. The Airport will provide landing fee abatements for all flights during the first year of service, and to offset the cost of new facilities in Rockford, both of which are still to be negotiated. For a period of one year the Airport will cover the new carrier’s cost of terminal rent (including ticket counter space, gate space, and office space), and apron rent (outdoor gate space, aircraft parking, and baggage handling).

Revenue Guarantee

The Chicago Rockford International Airport plans to make available the full share of the federal portion of the funding for this project – at least $500,000 – for a revenue guarantee to the new carrier, to cover losses that may occur during the first twelve months of service. Subject to negotiation, payments will be made to the new carrier 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.

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Additional Costs

As part of this program, the Chicago Rockford International 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, the Airport expects to incur some expenses in the recruitment of the carrier. The Airport will pay for these additional expenses out of other airport sources and will not incorporate these fees and charges into this proposal.

Figure

Updating...

References

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