Proposal for Funding Under the Alternate Essential Air Service

Program

Dockets DOT-OST-2007-28671

Submitted by

Middle Georgia Regional Airport

Doug Faour
Airport Manager
1000 Terminal Dr.
Macon, GA 31216

DUNS# ---------EIN #-----------

I.

History of Air Service

Air carrier service began at Middle Georgia Regional Airport (MCN) in 1947 and several
airlines maintained a high level of passenger service until the mid-2000s. In the 1980s and 90s,
passenger enplanements exceeded 100,000 and revenues from air service related amenities (i.e.
parking revenues) brought many years of prosperity to the airport. Delta Air Lines was the
primary air carrier for decades, but, due to consolidation and economic hardships, discontinued
service from the airport in 2008.
Since 2008, MCN was provided service by two commercial service operators, Georgia Skies
and Silver Airways, under the Essential Air Service Program. Georgia Skies began air service
under EAS subsidies in 2008, shortly after Deltas departure. They provided service exclusively
from MCN to ATL (Hartsfield-Jackson Atlanta International Airport); however, were unable to
obtain a terminal gate. Passengers were forced to deplane at a fixed base operator (FBO) and
shuttle from the FBO to the main terminal. Georgia Skies continued to operate this service until
2013; however, from 2011 until the cessation of services, they elected to operate without the
EAS subsidy. Throughout the final two years, the airline had an astronomically high number of
cancellations and delays, ultimately leading to less than 500 passenger enplanements during
2012. During their last year of operations, Georgia Skies failed to fly as frequently as it
cancelled flights.
More recently, Silver Airways (Silver) offered air service to MCN through the EAS
program. Silver also flew primarily from MCN to ATL; yet, added a secondary route from MCN
to MCO (Orlando International Airport) in 2013 and 2014. They did provide passengers with
terminal-to-terminal service, but were unable obtain any substantial interline agreements with
other airlines. Passengers were unable to reach their final destination without booking a ticket
through another airline; thus, significantly increasing collective ticket prices per passenger.
Their flight schedules to each airport also did not meet the needs of the community, but rather to
the maintenance needs of Silvers aircraft. They would utilize MCN as a bridge for aircraft
transferring from their Northeastern and Atlanta markets to their maintenance facilities in
Florida. Once Silver began ceasing all Atlanta based EAS routes, MCN became plagued with
cancellations and delays once again. Passengers quickly realized the lack of service and
convenience that Silver had initially offered and enplanements dwindled. Silver terminated
services in November 2014.
Since the departure of Silver, there has been no scheduled air service at Middle Georgia
Regional Airport. Public charters have utilized the terminal facilities to provide air service to
upwards of 130 passengers on a semi-regular basis. Each charter has operated with over a 95%
load factor and thus airline is continuing to schedule flights for the foreseeable future. This fact
alone displays that there is most certainly a demand for air service in Middle Georgia.
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II.

Community Air Service Needs and Strategic Plan

Middle Georgia Regional Airport has a market base of approximately 600,000 passengers
within 30 minutes of the airport. The largest employer and one of the most significant passenger
bases in Middle Georgia is Robins Air Force Base (RAFB). RAFB employs more than 25,000
civilians, contractors and military personnel, thus providing an opportune market for an airline
operating from MCN to service. Of these 25,000 employees, there are between 15,000 and
20,000 originating passengers traveling to other airports to fly on airlines that are capable of
transporting military personnel. They have no choice but to drive to Atlanta or another regional
airport to access the national air transportation system.
In order to remedy this issue, the Middle Georgia Community must first acquire an airline that
holds a D.O.D. certification. This will provide our large military market with the opportunity to
travel directly from their home community without requiring them to drive over an hour to
Atlanta. Secondly, the airline servicing our Community must offer flights to an ultimate
destination without having the option of driving and, if possible, prevent them having to connect
through another airport. The Community has proposed a route to Washington D.C., which is the
number two most desired destination for our catchment area. The 2013 True Market Study for
MCN displays the True PDEW (Passengers Daily Each Way) to the Washington D.C./Baltimore
Area is 105.5 and the True O&D Passengers is 77,025.
While, the true purpose of an EAS contract is to transport passengers to/through a major hub
airport, such as ATL, it is apparent that this approach has not been successful for the
Community. Airlines in ATL and other nearby hub airports are unwilling to offer code shares
routes with most EAS carriers. In addition, many other trends in the aviation industry are
negatively impacting the EAS program; i.e. the current pilot shortage. The Community feels that
given these negative influences, MCNs EAS carrier is most likely to increase their chance of
success by selecting a destination city versus a hub airport.
In addition to the aforementioned considerations, the Community will create an adequate
marketing plan to attract passengers in Middle Georgia and Washington D.C. It is essential that
our marketing strategy encompass the following:

Target military personnel and civilian passengers at RAFB and outlying

military bases
Market the Washington D.C. area; suggesting MCN as a quicker and more
convenient alternative to Atlanta
Advertise throughout the Middle Georgia Region to include all of the
nearly 1.1 million passengers within MCNs 19 County Catchment Area
Extend the market to Southern Georgia to potentially attract passengers
bypassing MCN for ATL or choosing airports in other states.
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In light of the recent failures of Georgia Skies and Silver Airways, the Communitys
marketing campaign must strive to regain the confidence lost during previous attempts at reliable
air service and rebuild the reputation from the rubble of the deplorable service. This will require
strategic planning, confidence and dedication on the part of the selected air carrier.

III.

Community Selection of Essential Air Service Provider

The Middle Georgia Regional Airport and Middle Georgia Community has prolonged the
selection process of an Essential Air Service provider for an extended length of time. This time
was to ensure that the selected airline could meet the travel needs of the community, they were
committed to rebuilding air service in Middle Georgia, and their strategic plan provided the level
of air service needed to reestablish reliable air service.
The Community has reviewed all proposals submitted by qualified airlines and has
determined that the Corporate Flight Management Proposal has the best chance for success in
Middle Georgia. Therefore, the Middle Georgia Community officially selects Corporate Flight
Management, d.b.a. Contour Airlines, as the preferred Essential Air Service provider for Middle
Georgia Regional Airport.
Corporate Flight Management (CFM) was formed in July 1982 and has grown to become one
of the largest Part 135 operators in the Southeastern US. They anticipate their annual revenue to
exceed $40MM and currently employee over 200 personnel. In March, 2016, the group formed
Contour Airlines to provide Essential Air Service from Tupelo, MI to Nashville, TN. The airline
has achieved over a 95% completion factor on this route and maintains over a 90% load factor in
this market. They have also obtained the proper certifications to conduct flight operations as an
approved air carrier for the United States Department of Defense (D.O.D.). This certificate
allows the airline to offer flights through the Defense Travel System and all government travel
portals. Contour will be able to transport military personnel and cater to the many military
installations in Georgia, including Robins Air Force Base. Neither Georgia Skies nor Silver
were able to obtain this certificate during their short tenures at MCN, thus were unable to obtain
any military passengers.
Contour will offer nonstop service to Washington D.C., therefore bypassing ATL and
traveling directly to MCNs number two most desirable destination. The Community feels that
this route will provide Contour with the best chance for success and to rebuild air service in
Middle Georgia. We believe that the key to restoring traffic growth in Macon is by stimulating
demand with low fares and offering a reliable, high quality product (CFM, 2016).

IV.

Analysis of Funding and Grant Requirements

Contained in Contours proposal, the carrier has estimated the following Revenue vs. Expense
Report for the Macon AEAS:
Operations
Scheduled Flights
Completed Flights
Scheduled Block Hours
Scheduled Seats
Scheduled ASMs

1248
1223 (98%)
2751.84
37440 (30 Seat Aircraft)
20,723,040

Revenue
Load Factor
Passengers
Average Base Fare
Fare with Tax
Fare Revenue
Total Revenue

45%
16511
$77.58
$89.00
$1,280,923.38
$1,280,923.38

Expenses
Fuel
Maintenance and Reserves
Pilot Costs
Aircraft Fixed Costs
Other Indirect Costs
Total Expenses:

$1,135,134.00
$2,270,268.00
$683,796.00
$359,100.00
$1,236,370.78
$5,684,668.78

Profit

$284,233.44 (5%)

Annual Subsidy

$4,687,978.841

Contour has indicated that they will provide reasonable ticket prices, with the ultimately goal
of reinvigorating the Middle Georgia air transportation market. Rather than chase revenue
projections by charging high last minute fares, the carrier plans to simulate demand by offering
introductory fares as low as $49.00 each way, gradually building to our standard long term fare
of $89.00 each way2. The airline also has plans to contribute a marketing campaign to attract
passengers to the airport.
In addition to the carriers promotional activities, the Middle Georgia Regional Airport and
the Middle Georgia Community will engage in supplementary marketing efforts. Air service

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CorporateFlightManagement,2016
Id.

will be promoted through the use of radio spots, television advertisements and commercials,
Facebook Advertisements, Google Advertisements, billboards and other means of positive
reinforcement. The community plans to provide approximately $12,000 of marketing and
advertisement funds, for the first eight months of service, to increase Contours promotions
throughout Georgia and in the Washington D.C. area.
To ensure reliable service Contour Airlines will base an additional Jetstream 41 aircraft at
MCN. Contour plans to dedicate an aircraft to each community in order to ensure the integrity
of the operating schedule. (Corporate Flight Management, 2016)3. In the event that an aircraft
experiences a maintenance issue or is delayed for an extended period of time, the second aircraft
will replace the scheduled aircraft; therefore minimizing delays and/or cancellations. This has
proven to be a very successful tactic in Contours other service markets.
Due to the decimation of air service at Middle Georgia Regional Airport over the past
decade, the carrier and MCN believe that reasonable ticket prices and reliability will rebuild the
communitys confidence in air service. Accomplishing that feat will not happen quickly and it
may take a significant amount of time for the community to once again trust an air carrier at
MCN. The Middle Georgia Community will strive to meet the Federal EAS requirements within
a two year period; yet, due to the aforementioned conditions, three years may be a more practical
expectation.
To ensure funds are spent in the manner proposed for the Alternate Essential Air Service, the
Middle Georgia Community will assign these duties to the Macon-Bibb County Grant Specialist
and Macon-Bibb County Finance Department. The Middle Georgia Regional Airport Finance
and Lease Manager will liaison all efforts between Macon-Bibb County and the airline; thus,
assuring that all invoices are accounted for and funds are distributed correctly.
Tracking of all flight operations, cancellations, delays, passenger enplanements, and any
other pertinent information related to the EAS operation of the airline at MCN, will be precisely
recorded and maintained by the Middle Georgia Regional Airports Operations Department.
This information will be shared with the Finance and Lease Manager to verify reliability of all
airline documentation and ensure correct payments in lieu of contractual obligations. These
parameters will be continually recorded throughout the three year term and will assist in
determining the success of the program.
A second reason for continuous monitoring of Contour is to determine if changes are
necessary to meet the minimum EAS requirements. All documentation and EAS program data
will be provided to the Department of Transportation prior to the conclusion of the carriers three
year contract, to conclude if they were successful in rebuilding air service in Middle Georgia.

Id.

Should that be accomplished, the Community will decide if it is in their best interest to continue
service with the carrier; and if not, elect to seek a new air service provider.
V.

Milestones and Obligations

The most critical milestone for air carrier service in the Middle Georgia community is
achieving the minimum ten passenger enplanements per day requirement. Furthermore, MCN
will strive to surpass the approximately 16,000 enplanements required to ensure the annual per
passenger subsidy remains below $200. The Community hopes that by providing a desirable
destination that is in high demand for our catchment area, ridership will increase significantly,
thus improving the likelihood of reducing the overall need for a subsidy.
Due to the nature of the alternative EAS program, the Community holds the authority to take
necessary corrective actions should enplanements not meet the 10,000 passenger threshold or if
the per passenger subsidy nears $1,000. The Community has learned from past experience that
excessive cancellations and delays undermine the confidence of travelers and will not be
tolerated. If cancellations and delays near an unacceptable level, the community may be forced
to explore all options, up to and including termination of service; if necessary.
Should the carrier achieve their goals and are successful in rebuilding air service in Middle
Georgia, MCN and Contour may explore the possibility of seasonal routes to other destinations.
This will provide the airline with an opportunity to expand their services, while providing
passengers with a greater variety of destinations. Further, success in alternate destinations will
provide proof that there is an even greater demand for service in the Community, than expected
by other prominent air carriers. This realization will, hopefully, lead to other carriers expanding
operations to Middle Georgia; in-turn increasing competition and reducing the need for federal
funding through subsidies.
Conclusion
Middle Georgia Regional Airport and the Middle Georgia Community are seeking to enter
the Alternate Essential Air Service Program, with air carrier service being provided by Contour
Airlines. As previously stated, over 600,000 passengers live within a thirty minute drive of
MCN and the Washington D.C./Baltimore area is the number two most desired destination. This
is most likely due to the large number of military personnel at Robins Air Force Base and other
nearby installations. Considering that Contour holds a D.O.D. Certificate, is able to transport
military personnel and have chosen a destination other than Hartsfield-Jackson Atlanta
International Airport (ATL), they already have an advantage over the previous two EAS carriers.
Should the airline succeed in meeting or surpassing the minimum EAS requirements and
rebuilding air service in Middle Georgia, the passenger base is ripe for possible route expansion
into new markets.
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In further efforts to ensure that statutory obligations are met, MCN Finance and Operations
Department will document and maintain all airline cancellations, operations, delays, and other
pertinent information to ensure that the Middle Georgia Community remains in compliance with
EAS requirements. This tracking will also assist in judging the success of the carrier and provide
accurate assessments to whether the DOT should continue to subsidize Contour for their air
carrier service. Rebuilding the communitys confidence in air carrier service from MCN will be
a significant task; however Contour is confident they will be able to accomplish this mission.
Through the use of low fares and servicing a destination city, such as Washington D.C. presents
a great opportunity to attract passengers.
Utilizing Middle Georgia Regional Airport will provide cost saving benefits and convenience
to passengers. The Middle Georgia Community is cautiously optimistic of Contours chances of
success; yet, feels that they have demonstrated their willingness to meet the needs of the
community. Therefore, the Community agrees that Contour Airlines provides the best
opportunity for reliable, prosperous, and sustainable air service to Middle Georgia.