Swanson, Brian (OST) 

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From: Sent: checktsa@gmail.com on behalf of Jim Gallagher [jg727@aol.com] Thursday, February 23, 2012 11 :23 AM To: Cc: Subject: Devany, Dennis (OST) manisteeairport@gmail.com; Swanson, Brian (OST) Re: Subsidy payment schedule

In short we need to get this executed as quickly as possible. Dennis and Brian; Ifyou couldplease tell us what you will accept...this would help.
In the traditional sense with both ofthe new proposals we have 1040 segments per year. In the two alternative proposals it equated to (without considering advance deposits or reconciliations knowing they may NOT be an option) a tractional flight segment payment as follows: 1. The 30 seater in Summer (2012)and 19 seater for the remainder ofthe 2 year period (lOx frequency average per week) with an option to use the 30 seater in the following periods; subject to load factor, yield, and availability,

..... at no additional subsidy for $2.1 annually or $2,020/completed flight segment 2. The 19 seater yearround (lOx frequency average perweek) $2.0 annually or $1,924/ completed flight segment ( we reserve the right to start oruse a larger aircraft ofcourse without penalty or change in subsidyrate) WE submit everything post month for completed segments. While Iwould like to argue points for higher in first year and lower in second year and of course would like to have capital deposit to start this program- we need to really get this through with an acceptable boilerplate. Please work something out with the airport that is accepatble so that we can move on and get this done RIGHT. Dennis and Brain, Pleaseknow that ifyou go out on a limb and approve this first proposal; once we get more cities utilizing an approved Alt EAS method, that ourrates should be lowered because ofthe economy ofthe scale. We are not asking for the whole pie; justa small piece ofit to start. As you may know that APN is considering this as well and we would love to have an opportunity to have multiple cities to lower ourprice andjustify additional support in the UP; which would make all the sense in the world. 1Iknow that it will be tough to approve a slightlyhigher rate with the first Alt EAS, but ifyou look at the totality ofthe picture; the rates that are being offered traditionally in other markets are much higher than our alternate proposals. AND I guarantee that ifwe can combine a market in the sameregion that is WILLresult in lower subsidyrates. Please let me know ifwe can help move this along. Thank-you for your continued consideration.

Jim Gallagher AviationTechnologies, Inc. PublicCharters.com CheckTSA.com 

# [@] 201 Hangar Road Wilkes-Barre/Scranton International Airport Avoca, PA 18641 570-457-4147 Phone 570-457-4L13 Fax 570-760-0880 Cell

On Thu, Feb 23, 2012 at 9:30AM, <Dennis.DeVany@dot.gov> wrote: OK, thought so. -----Original Message----- From: Manistee Airport [mailto:manisteeairport@gmail.com] Sent: Thursday, February 23, 2012 9:25AM To: Devany, Dennis (OST) Cc: Swanson, Brian (OST); <jg727@aol.corn> Subject: Re: Subsidypayment schedule Dennis,
In the two alternatives to the original proposal the 10 mentioned are 10 RTs perweek= 52 

## * 10 

## *2 = 1040 yearly segments. Thanks,

2--Barry

On Feb 23, 2012, at 8:26AM, <Dennis.DeVany@dot.gov> wrote: >Iwas assuming 10 per week meant 10 round trips. Does it mean 5 round trips a week?? > > -----Original Message----- > From: Manistee Airport [mailto:manisteeairport@gmail.com] >Sent: Thursday, February 23, 2012 8:05AM >To: Devany, Dennis (OST); Swanson, Brian (OST) > Cc: 1 im Gallagher > Subject: Subsidy payment schedule > >Dennis, Brian, > > During this process there is one set ofquestions Ihave been > expecting you to ask as it relates to ourAlternate EAS proposal, but > so far they have not come up. Those questions are in relation to how >inourproposal we were requesting that the subsidybe paid (or > eligible grant expenses be reimbursed depending onhow you structure >this). While this maybe a detail to be worked outlater, it is a > very important detail that causes some concern and nervousness on my > side not knowing where this stands. > >Specificallythe proposal as submitted stated: > > 3. Manistee requests that subsidybe paid as follows during the first year: >

- $75,000 monthly in arrears to cover fixed costs incurred by the Indirect Air > Carrier including, but not limited to, aircraft leases, stationrents >andleases, > personnel wages and salaries, insurance, etc. >

- $1,500 per completed flight to coverflight costs incurred by the > Indirect Air > Carrier including, but not limited to, fuel, crew costs, otherper block hour > expenses, etc. >

- A $200,000 one time startup deposit be paid upon execution ofthe Grant > Agreement to cover startup costs incurred by the Indirect Air Carrier > including, but not limited to, pre-service marketing, station startup costs, > personnel training, etc. This deposit would be applied towards the last > month(s) ofservice. >

- The cap on subsidy costs would be $2,400,000 in year one (not including the >deposit).
3> -Thepayment structure for the second year is to be mutually agreed upon by >DOT, the Indirect Air Carrier and the Airport Authority with a limit on > subsidy costs of$2,200,000 in year two. The goal being to structure on going >payments in such a way as to encourage the enplanement ofmore passengers, >thus reducing the subsidy level perpassenger. > >Whilethe exact final details may need to differ (especially since >there are now different Alternative proposals onthe table at >different subsidy levels), the overall structure is based onthree >points: 1) Separatebillings to coverFixed Costs vs. Per Flight >Costs, 2) Need for a Deposit/Advance, 3) A declining subsidy year 1 > vs. year 2. 

### > > Let me go into more detail as to why each ofthese items is important >to us in this proposal. > > 1) Separatebillings for Fixed Costs vs. Per Flight Costs >The traditional EAS program simplyuses aperflight subsidy as the > means for the subsidy payments. That simple model works even though >the costs ofproviding service are not all associated with per flight > costs. The reason it works is that standardEAS service provides the > same level ofservice week to week year round. So any fixed costs can >be rolled into the perflight subsidy. However in our proposal we are > asking for the flexibility under the AlternateEAS program to provide > service that matches the seasonality ofdemand at Manistee with more > service during peak summerperiods and less during offpeak winter >periods. Howeverthe fixed costs largely are consistent year round >(rents, salaries, etc) even though the number offlights might be > different. To reflect this reality, we haverequested splitting the >subsidyinto two parts, areimbursement monthly to coverfixed costs, >plus areimbursement perflight operatedto coverthose expenses >(fuel, crew, etc.). > > 2) Deposit. The proposal requests a $200,000 deposit/advance to be >appliedto the last month(s) ofservice. There are a lot ofup front > startup costs, training, station setup, advertising, etc. These are > costs that the airport within its financial ability is not able to > front and which for Public Charters, Inc. as a small company are also >difficultto cash flow. Therefore we are asking for this deposit in > order to help cover the startup expenses. > > 3) Varying subsidyrates year 1vs year 2. In all the proposals >(original and the two alternatives) we have provided an average 4>subsidyrate (2.3M, 2.1M, 2.0M). However in each case we would like > to see that average arrived at with a slightlyhigherrate year 1 vs. > year 2. In the original proposal that was achievedbyrequesting 2.4M > year 1 and 2.2M year 2. In the two alternatives no specific break > down was given, but the intention wouldbe something similar. The >reasonfor this is that we fully expect that in year 2 passenger > revenues will behigherthan in year 1. Year 1will be about > building. With a new hub, new carrier, new model it is going to take > some time to build the passengernumbers as the public is being >informed/educated on what is now available, this is especiallytme > since this will be starting after a hiatus in service. In year 2 we >will not befacing those same issues and therefore fully expect that > passengernumbers and thereforerevenues in year 2 will behigherthan > year 1. At this point it is nearly impossible to accuratelypredict >exactlyhow those passengernumbers will evolve, however in light of > this reasonable expectation ofincreasing numbers, we see the need for > slightlymore subsidy in year 1 vs. year 2. > >In summary, we are asking for these items in orderthat the payment of >subsidyreflects the timeline ofexpenses (and anticipatedrevenue) > associated with undertaking this endeavor. Whilethe total level of >subsidy is the most importantnumber, we request withinreason the > flexibility to request subsidy/reimbursement in a mannerthatreflects >thecosts associated with providing the service. > > While what is being asked for may seemcomplicated in light ofhow > standardEAS operates, we think that this provides us enough > flexibility while providingthe DOT with enoughrational tojustify >the subsidyrequests. The easiest thing for all parties wouldbe for > us to request the entire subsidy up front as one large sum, that would > give us the mostflexibility in how to use it and it wouldbe easiest >foryou to manage. However, it is obvious why that wouldn'tbe > feasible for all parties involved. Therefore we believe what we are > asking for to be reasonable in that it still has some flexibility for > us, but isn't too difficult for DOT to manage. > >thanks, >--Barry

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