SAVANNAH AIRPORT COMMISSION Savannah/Hilton Head International Airport

400 Airways Avenue Savannah, GA 31408 Telephone (9 12) 964-05 14 Fax (9 12) 964-0877

e-mail: info@savannahairport.com www.savannahairport.com

April 20,2005

C W R W Docket Operations Media Management Division Norton Melaver

W C E - C W R W

Sylvester Formey

COMMISSIONERS

Stephen S. Green Yvette Johnson-Hagins

Jay R. Turner

LEGAL COUNSEL

James B. Blackburn

mcU77VE DIREClVR

M-30 Room PL-40 1 Department of Transportation 400 Seventh Street, SW Washington, D.C. 20590

Re: for Savannah, GA. Docket OST-2005-20127 - (0 1

Proposal under the Small Community Air Service Development Program

On behalf of the Savannah / Hilton Head International Airport it is my pleasure to present to you the following Grant Request to supplement the ongoing efforts of our “First Services” initiative. The main goal behind “First Services” is to secure new airlines and retain existing carriers specifically by appealing to their bottom-line and offering expanded service by means of taking over station operations.

It is widely known that airline costs are at an all-time high, making it increasingly difficult for Airports to attract new carriers in a time of rampant cutbacks. Rising fuel prices, labor costs and more create an environment where even daily operations are severely challenged which further dilutes the chances of airlines expanding into new markets / airports. The current system by which airlines establish separate and redundant station operations at the airport further exacerbates airlines’ financial difficulties creating entry barriers for new airlines as well as exceedingly-high operating costs for the airport’s current airlines.

This Grant Request seeks $723,160.00 in federal funding to be used by the Savannah / Hilton Head International Airport to take over and fund station costs thereby increasing the Airport’s overall appeal to potential, new airlines.

Patrick S. Graham, A.A.E. The Savannah Airport Commission is the sponsoring organization. As its Executive Director, I will be responsible for administering the grant. Please contact me if you have any questions at 912-964-0514 or paraham@savannahairport.com.

Daniel J. Coe, Jr., A.A.E.

Proposal Under the Small Community Air Service Development Program

Savannah, Georgia

Background

In July 2003, the Savannamilton Head International Airport was fortunate to be

awarded the Small Community Air Service Grant in the amount of $1,046,990. The

money was utilized for an extensive 2-year marketing campaign in order to take

advantage of the Airport’s new identity with Hilton Head Island, SC. The name change

was adopted in order to take advantage of the following: 1. The geographical proximity

of Savannah to Hilton Head Island, 2. The airport’s customer base (55% of passengers

utilizing the airport travel to or from South Carolina), 3. Internet marketing opportunities,

and 4. Making Savannah/Hilton Head International Airport a destination of choice on the

various Internet travel sites.

Since acquiring the funds, the Airport has been able to achieve the following: 1. Attract a

new carrier (Independence Air), 2. Convince a former carrier to return (American Eagle),

3. Add new non-top destinations, and 4. Enjoy record growth. The outcome of our

success is that we must continue to “grow”

the airport. Soon, the Airport will expand its

terminal by five gates, with construction set

to begin in the fourth quarter of 2005. The

Airport plans on managing and staffing the

new gates and will also continue to offer incentives to air carriers including reduced

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landing fees, marketing incentives, and reduced start-up costs. In addition, the airport’s

“First Services” initiative will allow the Airport to offer new and existing carriers a

unique opportunity to reduce their station costs while continuing to “raise the bar” with

regard to passenger customer service.

Public-Private Partnership Program

To assist in facilitating continued growth, the Savannah/Hilton Head International

Airport would enter into a partnership with The Savannah Economic Development

Authority (SEDA). As an economic engine of Chatham County, SEDA has a vested

interest in the area’s development and prosperity, making this partnership a mutually-

beneficial one.

Educational Opportunities

The Airport will partner with Savannah State University, Armstrong Atlantic State

University, Savannah Technical College, and Project Quick Start to offer college credit

relating to aviation. This opportunity would allow students to learn first-hand, different

aspects of the aviation industry and be trained to enter the work place upon successful

completion of the required courses.

Strategic Plan

The goal of this program, which is consistent with the legislation, is to stimulate new

demand at the SavannaWHilton Head International Airport (SAV) by appealing to leisure

and business travelers through effective advertising and marketing in the major markets

that traditionally support both Savannah and Hilton Head Island. By stimulating new

demand for both Savannah and Hilton Head Island, it is our intention that the airlines that

serve Savannah would increase capacity, add destinations and utilize larger equipment.

Funding Assurances

Destination Atlanta

Chicago O’Hare Newark

NY La Guardia

The Savannah Airport Commission has been identified as the coordination entity between

the cities, businesses and carriers. A separate project has been established by the

Savannah Airport Commission to account for the related costs that are subject to both

Internal and External Auditor’s review and the Federal Single Audit requirements.

Avg R/T Airfare Daily Departures Type of Equipment $179.42 12 Large Jet $259.08 3 Regional Jet $214.60 3 Regional Jet $246.14 3 Regional Jet

Program Monitoring

NY JFK Wash Dulles

The Savannah Airport Commission will monitor the success of the program and provide

periodic reports, which will allow the Airport Commission to modify or discontinue the

$197.34 2 Regional Jet $225.54 8 Regional Jet

program.

Non-Diversion Assurances

Savannamilton Head International Airport is a unique market in that service at the

airport has not impacted service at other airports. It is expected that this positive impact

on surrounding airports will continue under the grant.

Synopsis of SAV Air Service Existing Service:

The Savannah/Hilton Head International Airport currently offers 38 daily departures with

nonstop service to the following 10 destinations:

Houston Inter Cincinnati Charlotte

Daily Orlando service began in December 2004. Dallas service will resume in June 2005

and Northwest will begin daily Minneapolis service in June as well. All destinations

served, with the exception of NY LaGuardia, are considered “hubs” for the participating

carrier and offer passengers connections to the originating carriers domestic &

international routes. Additionally, Saturday service is available to Philadelphia, Boston,

$298.48 2 Regional Jet $247.86 5 Regional Jet $34 1.98 5 Large & Regional Jet

Pittsburgh, LaGuardia, and Washington Reagan National.

Historical Service

The Savannah/Hilton Head International Airport is fortunate that AirTran and

Independence Air offer air service to/from the Savannah & Hilton Head Island market.

They are instrumental in dramatically lowering the entire airfare structure at SAV while

keeping the competition honest. AirTran’s participation in the ATL market and

Independence Air’s participation in the Washington market demonstrates their impact on

fares and expansion of the areas.

September 1 1,200 1, rising fuel costs, and labor issues have had an adverse affect on the

way airlines traditionally operate. Unfortunately, Savannah/Hilton Head International

Airport is continuously being asked for concessions from the current carriers in order to

reduce the carriers’ cost of operating into Savannah. With “First Services” in place, the

Airport would be able to offer a unique incentive and the Airport would anticipate

enthusiastic participation from new and existing carriers.

Funding Requirements

The goal of the Savannah/Hilton Head International Airport is to add new markets,

increase airport operations and ridership while still maintaining the level of service our

customers have grown to expect.

The funding assistance from the small community air service program will allow the

Savannah/Hilton Head International Airport to launch a comprehensive passenger and

ground services program with the following objectives:

Passenger and Ground Handling Service

New airlines, in order to compete with established carriers, are sometimes forced to begin

station operations with a minimum of three daily flights. Thus they require a larger

market share than normally would be expected in order to cover their start-up costs.

Typically, costs associated with start-up are as follows: Ground equipment, passenger

check-in computers at both the ticket counter and gate area, labor, airport rent and fees,

and market development.

“First Services” would assist new and existing carriers by alleviating the day-to-day

costs of doing business such as: station personnel, costly equipment, associated real estate

costs, lease obligations.

“First Services” would offer a more efficient way of operating as follows: 1. Cost

savings, 2. Ability to add flights without increasing cost, 3. Customer service, and

4. Highly- trained staff.

The Airport would provide all necessary passenger handling and ground handling

equipment including but not limited to: Cute system (or similar system), computers,

communication lines, towing tractor, tow bar, belt loader, baggage carts, lavatory carts,

water truck, and fuel truck.

The Airport would be reimbursed on a per turn (inboundoutbound) basis. This fee would

be determined based on the size of aircraft, number of flights, and service requested. This

fee could also be discounted for start-up airlines. “First Services” would be able to lower

the fees as more airlines participated. The Airport would strive to have as many tenants as

possible participate and would initially hire from the existing labor pool.

Win-Win Situation

Airlines: Eliminate start-up costs, achieve profitability quickly, and insert additional

service when needed.

Airport: Ability to offer a viable alternative to the airlines without financial guarantees

Employees: Career options, better benefits, employment stability

Associated Costs for “First Services”

EquiDment Cute System (Counter & Gates) Office computers & supplies Communication Lines Towing Tractor (2 @ 30,000) Belt Loader (2 @ 20,000) Baggage Cart (4@ 2000) Fuel Truck Total:

Personnel Full Time (5 @ 10.00 per hr) Benefits/Taxes/Retirement Part Time (5 @ 10.00 per hr) Benefits/Taxes Uniforms Total:

Cost $250,000.00

5,000.00 6,000.00

60,000.00 40,000.00 8,000.00

100,000.00 $469,000.00

$104,000.00 39,520.00 78,000.00 29,640.00

3,000.00 $254,160.00

Grand Total: $723,160.00 Less 50% Co-op Partnership Total Requested $361,550.00

Conclusion:

If awarded this grant, the Airport would be able to offer the airlines operating into the

SavannahMilton Head Island a unique incentive, no station costs. The Airport would be

able to deeply discount start up costs or waive the costs for an extended period. Although

only a few U.S. airports have implemented a similar program, most major European

airports offered these services to other airlines for years.

This proposal is based on staffing and equipment for one ticket counter (two positions)

and a minimum of two gates. The Airport feels strongly that if “First Services” is

implemented most if not all carriers operating into The Savannah/Hilton Head

International Airport would take advantage of the cost savings. The Airport currently has

two former airline station managers under its employ and would be able to administer the

program successfully.

Consideration for Air Service Development Zone:

Savannah is fortunate to be an intricate part of a business development zone that has the potential to become one of the leading technical sectors in the Southeastern United States. The major components of the zone are:

The Savannamilton Head International Airport’s Southwest Quadrant

Over 100 acres developable land Aviation-only related business Prime location for regional jet maintenance hangar Prime location for regional jet paint shop Prime location for airplane manufacturing plant

The Georgia Ports Authority: Major economic driver for Savannah Growth rate of 31% for last two years Constructing an 8‘h container birth Acquired land for continued growth Revenue in excess of 100 million dollars Foundation for long term sustained growth Savannah named the top logistics location in the United States

Gulfsteam Aerospace

Savannah’s largest employer Worldwide leader of corporate jet aircraft

Responsible for 15% of initiated business travel from SAV

J.C. Bamford

Planned expansion in 2005 World’s largest manufacturer of excavation equipment

Mega Site 0 One of the world’s largest ready to build sites

1560 acre site corner of I1 6 & I95

Crossroads Business Center 1800-acre business and technology park developed by the Savannah Economic Development Authority New home to Georgia Institute of Technology (Georgia Tech Regional Engineering Program)

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New Home to Savannah Technical College Infrastructure capable for latest technologies Master planned to support 1,000,000 square feet of private office space

The Research Park at Skidaway Island 0 Skidaway Institute of Oceanography

o Allows for collaborative efforts with institutions in the University System of Georgia

o Current grants underwritten by 9 National Science Foundation . Office of Naval Research 9 Department of Energy

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100-acres of leasable property

Marketing to companies involved in biotechnology, environmental technology, and related fields

MSA Potential Growth

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West Chatham County will increase 35% by 2010 Renowned area developer Harvey Gilbert predicted the following for the zone:

o Liberty, Beaufort and Jasper Counties will become connected to the Savannah MSA

o Inevitable growth and development corridor will emerge with this 50-mile radius from the intersection of Interstates 16 and 95

. Currently population of 600,000

. “In ten years Metro Savannah will be a continuous and well-connected economic and employment center from Beaufort, SC and Hilton Head Island through Savannah to Brunswick, GA.

The Savannah/Hilton Head International Airport is located in the middle of the zone. The airport’s southwestern quadrant has been recently improved in an effort to secure more aviation related business.

In order for Savannah to maintain this growth it is incumbent upon the airport to be able to provide and maintain first-class air service. The Savannah /Hilton Head International Airport is a perfect candidate for designation as an Air Service Development Zone. The incredible growth potential of the zone would allow Savannah to become “the poster child” for the DOT.