Air Service Development Flashcards by Steve Wright

Why is Air Service Development important?

Increased Revenue Stream

Community Jobs

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How are small community airports connected to the air service system?

As spokes within the hub and spoke system.

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Smaller cities, sometimes known as __________ __________, consider air service an ___________ __________.

spoke cities / economic necessity

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Challenges to small cities attracting air service include:

Proximity to a legacy network hub
Proximity to a community with low-cost air service
Fragmentation based on nearby competing airports
Seasonal tourism passenger markets
Physical airport constraints

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To make an effective case to prospective airlines, what three things must be understood or considered by the airport / community?

Fares and service to nearby, similar communities
Airline revenue structures
Financial and non-financial incentives that can be offered

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Define Air Service Development (ASD).

Activities undertaken by an airport and/or affiliated communities to retain or improve air service access and capacity in order to improve the regional economy.

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Regarding air service, what is the primary goal of an airport?

Retention of existing air service.

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What is important for airport executives to consider regarding ASD, especially those that do not believe airports and communities should try to influence an air carriers decision to serve a market?

AEs must consider the possibility that an air carrier may not have all the info necessary to make a good decision about serving their airport.

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Like any business, airlines weigh serving a destination based on potential ____________ versus _____________.

revenues / expenses

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An airport wants to assist an airline with marketing. Can an airport pay for a billboard ad containing the airline destination and airline logo? Please explain.

Yes and No. It is dependent upon if the airport logo also exists on the ad and if the ad favors the airport vs. the airline.

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Airports with high ____________ costs will find it more difficult to attract air service. For example, this would result in higher landing fees, terminal rents, parking rates, etc. Additionally, airports that have access issues from the ___________ ___________ source, will also struggle with retaining or attracting air service.

infrastructure / primary intermodal

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To determine air service needs, market research should be conducted to determine current ____________ ____________, whether artificially high ___________ are prevalent, or ____________ exists.

route deficiencies / airfares / leakage

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What factors contribute to leakage from small airports?

A large hub airport or one served by a low cost carrier within 100 miles.
Passengers will drive for more (or perceived) flight options or non-stops.

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In support of ASD programs, airport revenues are limited to promoting the ____________ by sponsor assurances. Additional ___________ should come from private industry, convention / visitor bureaus, and area attractions.

airport / funding

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What two primary forms of federal assistance can provide ASD aid to small communities?

Essential Air Service (EAS)

2. Small Community Air Service Development Program (SCASDP)

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While small communities may not have passenger demands due to population, employment, and income levels, there may be demand based on what?

Lack of viable alternatives.

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What entity is the fundamental stakeholder and in the best position to provide perspective and direction to the ASD effort?

The airport.

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From which Act did the SCASDP evolve?

Wendell H. Ford Aviation Investment and Reform Act of 2000

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How is the SCASDP executed?

Sec. of Transp. authorized to issue up to 40 grants per year (no more than 4 per state) to secure enhancements that will benefit a community’s transportation needs.
Benefits must be expected to continue beyond initial expenditures
Community must be no larger than a small hub.
Air service must be insufficient or charge unreasonably high airfares.

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SCASDP grants can be used for what six things related to ASD?

Expenses of new advertising or promotional activities
New studies to measure air service deficiencies
Measure traffic loss or diversion to other communities
New, dedicated air service development staff
Market research by advertising or public relations agencies, universities, or consulting firms
Air carrier subsidies for a max of three years

An ASD evaluation should begin with an ____________ that considers existing air service, seasonal factors, and anomalies to determine ____________, ____________ ____________ and ratio of _____________ & ____________ passengers.

assessment / destination / load factors / origin & destination (O&D)

What if assessment of O&D passenger estimates demonstrate a viable market?

Airport could propose new non-stop flights to airline(s).

What is an airport’s catchment area?

2. Name some factors that influence this.

It is the geographic reach of an airport’s service area.

2. airport access, other airports, road network, airfares, flight availability, and frequency

While existing air service can serve as a ___________ tool, luring new air carrier service may affect the airport’s ability to _________ the original service.

marketing / retain

The typical low-cost carrier (LCC) business model is to operate from ____________ airports within the main airport's ____________ area. More recently though, LCCs are operating out of ___________ ___________ to compete directly with ____________ carriers. Further, some are developing code share agreements with regionals to feed passengers.

secondary / catchment / large hubs / legacy

International ASD is more difficult because so many aspects making int'l service attractive are ___________ the airport's control.

beyond

1. What are some ASD incentives that airport's use? | 2. Which is the most utilized incentive?

1. min revenue guarantees, waivers, marketing and advertising, non-financial, ground services handling, and retaining marketing consultants. 2. Minimum revenue guarantees

1. What is another incentive that is effective in communities with a strong business base? 2. How does it work?

1. Travel Bank | 2. Communities pay cash up front, then business people use debit cards against the pre-paid travel

When are waiver incentives appropriate?

When trying to attract new air service and the profitability is uncertain.

In the _________ process of ASD, what two factors are most important to potential air carriers?

long / airport infrastructure and incentive programs

In addition to O&D and enplanement data, what other local info are air carriers in need of to decide on air service?

1. Economic and demographic data 2. Businesses and travel habits 3. Civilian, gov't, and military facilities 4. Tourist attractions

In addition to local information, what is critically important to air carriers in deciding on air service?

Detailed Route Forecasts

What are some considerations of a detailed route forecast?

1. Proposed schedule 2. Aircraft type 3. Comparison to similar markets 4. Operating assumptions (O&D traffic forecasts & variables) 5. Financial assumptions 6. Forecast operating results (load factor, market share, etc.) 7. Forecast financial results (CASM, break-even load factor, etc.) 8. Financial sensitivity analysis

How is the effectiveness of an ASD program evaluated?

1. Objectives known 2. Outcomes measured 3. Variables accounted for

Regs, laws, and grant assurances prevent communities from making laws that affect air carrier __________, __________, or __________. In addition, the airport must be available public use without __________ __________.

routes, price / service / unjust discrimination

According to the FAA ____________ ____________ ____________ ____________, there are limited circumstances in which an airport can offer incentives to an air carrier.

Air Carrier Incentive Handbook

Air carrier incentive programs are distinguished from ___________ ___________ programs, which serve to increase revenue to a particular region.

destination marketing

Airport revenues must not be used to promote __________ __________ development or activities unrelated to an airport or airport systems. They can, however, be used to promote airport __________, ___________, or new ___________ ___________.

general economic / competition, awareness / air service

Air Carrier Incentive Programs are unrelated to EAS or SCASDP, and are subject to ____________ rules and regs.

separate

1. Within an air carrier incentive program, there are ___________ and ____________. 2. Describe the difference between them.

1. subsidies / incentives 2. a) Subsidies are a direct payment to an air carrier, or those providing goods or services to that carrier, in exchange for add'l service. b) Incentives are a fee reduction, fee waiver, or use of airport revenue for acceptable promotional costs, where the purpose is to increase air carrier service.

Promotional incentives to air carriers, according to the FAA, are allowed for what two reasons?

New service or to promote competition.

Incentives, under some circumstances, may be offered to new carriers, but not __________ carriers, for no longer than _________ __________. At that point, the new carrier is considered to be a ___________ carrier and no longer eligible.

existing / one year / tenant

The cost of providing incentives to an air carrier ___________ be included in the rate base of other operators not participating in the incentive programs without their ____________.

cannot / permission

The ___________ of an air carrier incentive program must be clearly articulated and have ___________ designed accordingly.

goals / incentives

The FAA reminds airport operators that an air carrier incentive program is limited to __________ __________. The program is designed to determine service ___________, not ____________.

two years / viability / subsidization

Is it acceptable for an airport to have other carriers make up for the lost revenue associated with incentive programs?

What restriction is placed on airports if another group (Chamber of Commerce, local gov't, Convention and Visitors Bureau) offers subsidies to a carrier?

The airport can not have any involvement. This means no negotiations, implementation or monitoring participation.

Provide examples of incentives to air carriers that are unacceptable.

- Aircraft Parts - Free Fuel - Interest-free Loans, - Paying for leased property not airport owned for carrier - Pay for service, direct or indirect subsidies. They must be in agreement with established goals of the air carrier incentive program and in compliance with all grant assurances.