Another Look: Toledo's 2011 SCASD Grant

Discussing Great Lakes Aviation

Another Look: Toledo's 2011 SCASD Grant

The 2011 Small Community Air Service Development grant program awarded Toledo Express Airport and the Toledo Lucas County Port Authority with funds for marketing, launching a new carrier, start up cost offset, opening a new route, and/or revenue guarantees. The $750,000 grant is being matched with $250,000 from Airport cash funds, $250,000 from non-airport cash funds, and an additional $877,525 on In-Kind contributions. Those In-Kind contributions include media agreements for advertising and other contributions. That is a total of $2,127,525 that is available for new air service from Toledo. That answers the “how” of the way this service will come to fruition, but let’s look at the other major questions.

Why is this being done? Toledo has been impacted harshly by the change in air service in this United States. While blame can be extended to many parties, both in the industry and locally, there are many factors that have impacted TOL in our opinion. The largest of course being the major hub an hour north at Detroit Metro which captures 82.8% of Toledo originating passengers. Toledo Express itself only captures 7.6% of passengers. In 2011, that was just over 144K passengers out of an estimated market of nearly 1.9 million passengers per year. TOL also sees leakage to Cleveland (3.2%), Columbus (1.9%), Dayton (1.6%), and Lansing (0.8%) according to the 2011 SCASD grant application. Recapturing this traffic is going to be keep in getting air service back to Toledo.

So who is the target for service? Frontier Airlines was the headlining carrier for air service, but indications continue to hint that Frontier is not interested in pursing the service. Had they taken up the option, they would have operated a daily flight to Denver aboard an Embraer ERJ-190 aircraft. Those aircraft, operated by Republic Airlines, are leaving the fleet however and Frontier’s new focus on it’s Trenton focus operation make it less likely Toledo would receive service. The application went on to mention if Frontier did pass they would look at either United Airlines or Southwest Airlines for Denver service.

Southwest Airlines would be the least likely to happen as it continues to integrate markets formerly operated by AirTran Airways and will focus on that through 2014 when integration should be complete. It will then likely be focused on international expansion and the unlocking of domestic restrictions from Dallas Love Field. The other option being United has potential, but it would seem closer destinations might work out better for the return of United. The application mentions additional options with United being either Houston or Washington Dulles. By most estimates, the service to IAH could be handled by a 50-seat RJ whereas the IAD service could be accomplished via  Dash 8 turboprop. The other options mentioned involve two carriers headed for a merger. American is mentioned for re-establishing service to Dallas/Fort Worth and US Airways to return with service to Philadelphia or Charlotte. It is hard to really say how the integration will progress, but most reports suggestion that US Airways’ management team, who will take over running the new American, will retain many of American’s systems. Therefore it might be easier to expand the American next while the US Airways network is integrated. Regardless, the strength of American’s existing Chicago service (strong yields) could help Toledo in the long run. Should Dallas get the nod, it can open the door for additional service to PHL and/or CLT down the road. It would also make sense for DFW service since AA is already established in TOL which would reduce start up costs. On the flip side, pursing United instead would allow TOL to be connected to the Star Alliance. It would also give Toledo options to the east (if IAD is pushed) which has been missing since flights to CLE and PIT were ended.

So we’ve answered the who, the where, the why, and the how. For the when, it is a bit cloudier. Typically SCASD grants require funds to be requests (service initiated/planned) with in 2 years of the award date. The 2012 awards however allowed for up to 3 years for grants to be used, so there might be some flexibility when it comes to the TOL grant. Regardless, it is likely we are nearing a decision at some point this year when it comes to using the grant. Chances are, in our opinion, is that grant will be used this time and won’t go unused like the previous grant the airport received for New York service. That application limited Toledo significantly to both a destination and a partner carrier (Delta) which is not the case with the current application. Options were given for flexibility in Frontier backed out and the only additional work the Port Authority might have to do is get approval from the DOT for a destination modification (Denver to Washington or Dallas).

View the grant application here: http://www.regulations.gov/#!documentDetail;D=DOT-OST-2011-0119-0069

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