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; 

If you could please tell us what you will accept...this would help. 

In the traditional sense with both of the 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 of the 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 year round (lOx frequency average per week) $2.0 annually or $1,924/ 

completed flight segment ( we reserve the right to start or use a larger aircraft of course 

without penalty or change in subsidy rate) 

WE submit everything post month for completed segments. 

While I would 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, 

Please know that if you go out on a limb and approve this first proposal; once we get 

more cities utilizing an approved Alt EAS method, that our rates should be lowered 

because of the economy of the scale. We are not asking for the whole pie; just a small 

piece of it 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 our price and justify additional support in the 

UP; which would make all the sense in the world. 

1 
I know that it will be tough to approve a slightly higher rate with the first Alt EAS, but 

if you look at the totality of the picture; the rates that are being offered traditionally in 

other markets are much higher than our alternate proposals. AND I guarantee that if we 

can combine a market in the same region that is WILL result in lower subsidy rates. 

Please let me know if we can help move this along. Thank-you for your continued 

consideration. 

Jim Gallagher 

Aviation Technologies, Inc. 

PublicCharters.com 

CheckTSA.com 

[@] 

201 Hangar Road 

Wilkes-Barre/Scranton International Airport 

Avoca, PA 18641 

570-45 7-414 7 Phone 

570-457-4 L 13 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: Subsidy payment schedule 

Dennis, 

In the two alternatives to the original proposal the 10 mentioned are 10 RTs per week= 

52 * 10 * 2 = 1040 yearly segments. 

Thanks, 

2 
--Barry 

On Feb 23, 2012, at 8:26AM, <Dennis.DeVany@dot.gov> wrote: 

>I was 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 of questions I have been 

> expecting you to ask as it relates to our Alternate EAS proposal, but 

> so far they have not come up. Those questions are in relation to how 

>in our proposal we were requesting that the subsidy be paid (or 

> eligible grant expenses be reimbursed depending on how you structure 

>this). While this may be a detail to be worked out later, it is a 

> very important detail that causes some concern and nervousness on my 

> side not knowing where this stands. 

> 

>Specifically the proposal as submitted stated: 

> 

> 3. Manistee requests that subsidy be 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, station rents 

>and leases, 

> personnel wages and salaries, insurance, etc. 

> - $1,500 per completed flight to cover flight costs incurred by the 

> Indirect Air 

> Carrier including, but not limited to, fuel, crew costs, other per block hour 

> expenses, etc. 

> - A $200,000 one time startup deposit be paid upon execution of the 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) of service. 

> - The cap on subsidy costs would be $2,400,000 in year one (not including the 

>deposit). 

3 
> -The payment 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 of more passengers, 

> thus reducing the subsidy level per passenger. 

> 

>While the exact final details may need to differ (especially since 

> there are now different Alternative proposals on the table at 

>different subsidy levels), the overall structure is based on three 

>points: 1) Separate billings to cover Fixed 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 of these items is important 

> to us in this proposal. 

> 

> 1) Separate billings for Fixed Costs vs. Per Flight Costs 

> The traditional EAS program simply uses a per flight subsidy as the 

> means for the subsidy payments. That simple model works even though 

> the costs of providing service are not all associated with per flight 

> costs. The reason it works is that standard EAS service provides the 

> same level of service week to week year round. So any fixed costs can 

> be rolled into the per flight subsidy. However in our proposal we are 

> asking for the flexibility under the Alternate EAS program to provide 

> service that matches the seasonality of demand at Manistee with more 

> service during peak summer periods and less during off peak winter 

>periods. However the fixed costs largely are consistent year round 

>(rents, salaries, etc) even though the number of flights might be 

> different. To reflect this reality, we have requested splitting the 

>subsidy into two parts, a reimbursement monthly to cover fixed costs, 

> plus a reimbursement per flight operated to cover those expenses 

>(fuel, crew, etc.). 

> 

> 2) Deposit. The proposal requests a $200,000 deposit/advance to be 

>applied to the last month(s) of service. There are a lot of up 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 

>difficult to cash flow. Therefore we are asking for this deposit in 

> order to help cover the startup expenses. 

> 

> 3) Varying subsidy rates year 1 vs year 2. In all the proposals 

>(original and the two alternatives) we have provided an average 

4 
>subsidy rate (2.3M, 2.1M, 2.0M). However in each case we would like 

> to see that average arrived at with a slightly higher rate year 1 vs. 

> year 2. In the original proposal that was achieved by requesting 2.4M 

> year 1 and 2.2M year 2. In the two alternatives no specific break 

> down was given, but the intention would be something similar. The 

>reason for this is that we fully expect that in year 2 passenger 

> revenues will be higher than in year 1. Year 1 will be about 

> building. With a new hub, new carrier, new model it is going to take 

> some time to build the passenger numbers as the public is being 

>informed/educated on what is now available, this is especially tme 

> since this will be starting after a hiatus in service. In year 2 we 

>will not be facing those same issues and therefore fully expect that 

> passenger numbers and therefore revenues in year 2 will be higher than 

> year 1. At this point it is nearly impossible to accurately predict 

>exactly how those passenger numbers will evolve, however in light of 

> this reasonable expectation of increasing numbers, we see the need for 

> slightly more subsidy in year 1 vs. year 2. 

> 

>In summary, we are asking for these items in order that the payment of 

>subsidy reflects the timeline of expenses (and anticipated revenue) 

> associated with undertaking this endeavor. While the total level of 

>subsidy is the most important number, we request within reason the 

> flexibility to request subsidy/reimbursement in a manner that reflects 

>the costs associated with providing the service. 

> 

> While what is being asked for may seem complicated in light of how 

> standard EAS operates, we think that this provides us enough 

> flexibility while providing the DOT with enough rational to justify 

>the subsidy requests. The easiest thing for all parties would be for 

> us to request the entire subsidy up front as one large sum, that would 

> give us the most flexibility in how to use it and it would be easiest 

>for you to manage. However, it is obvious why that wouldn't be 

> 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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