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Before the 

EAS & Domestic Analysis Division, X-53 

OfHce of Aviation Analysis, Room 6401 

Department of Transportation 

400 7th Street, S.W. 

Washington, D.C. 20590 

In the Matter of: 

ESSENTIAL AIR SERVICE AT 

LAKE MINCHUMINA, ALASKA Docket OST 2008-0237 

Proposal to Provide Essential Air Service at Minchumina, Alaska 

Warbelow's herby submits its proposal to provide subsidized service to Minchumina, 

Alaska for a two-year period, beginning November 1, 2010. 

The proposed service is direct to Minchumina from Fairbanks, and return. No upline or 

downline points are contemplated at this time. 

Mail Rates 

Order 2010-3-18 set new mail rates that we have used to calculate mail revenue over the 

subsidy period: 

RTM $13.4782 

Terminal/Ton Enplaned $745.01 

Fairbanks-Minchumina 82 miles 

Therefore the P-135 rate for Fairbanks/Minchumina is $0.93 /pound and we have not 

projected any change over the subsidy period. 

Current passenger fares and cargo rates are used in these calculations. These reflect no 

change over the current subsidy period. 
Schedule 

Warbelow's proposed developing a schedule with input from the community. Since the 

proposal contemplates that some flights will be flown with a single engine VFR aircraft it would 

be reasonable to plan a morning or mid day schedule at least during the winter months when 

daylight is limited. 

We understand the current schedule is on Tuesday midday. If that is desirable to the 

community, we would propose to continue a Tuesday schedule. However, we would meet with 

the community to consider their input. 

The RFP leaves open the frequency of service, ie twice weekly with a single engine 

aircraft or once weekly with an IFR or muli-engine aircraft. When scheduled service is .only 

once a week, we believe it is difficult to build traffic, especially tourism related traffic. On the 

other hand, while Lake Minchumina is a relatively easy VFR route without high terrain, weather 

is often an issue because it is essentially in the pass (albeit a wide flat pass) between the 

Kantishna and Kuskokwim drainages. This argues for IFR capable aircraft. Warbelow's offers 

any combination of IFR or VFR aircraft and frequency that the Department and the community 

might choose. 

It is our understanding that the community, while desiring reliable and frequent service, 

is also concerned about the cost, even though the subsidy is through the EAS program and not 

directly paid by the community members. Given that, we would recommend a base line service 

of once a week with a single engine VFR aircraft, with flexibility to provide twice a week service 

when demand warrants and IFR service when conditions require. One concept might be to 

authorize a maximum cost, which can be dynamically allocated between more frequent service 

when demand warrants or IFR aircraft when conditions require. A baseline schedule on Tuesday 

could be supplemented with a second flight on Thursday say when three or more PEQ's can be 

scheduled for the Thursday flight. This option might be limited to not more than 26 flights per 

year. Similarly, a larger and IFR capable aircraft could be used up to a maximum number of 

flights per year as conditions require. 

Projected Demand 

Since Warbelow's is not the incumbent carrier in Minchumina, we are uncertain of the 

expected demand. The traffic data provided in this request for proposals appears to include all 

deplanements at Minchumina, and a substantial part of the passenger traffic appears to have been 

moved by charter flights other than the incumbent subsidized carrier during the current period. It 

is not clear to what extent charters would continue, so it is difficult to predict load factors on the 

scheduled flights. 

Warbelow's has a track record of developing tourism products in rural villages. A 

significant part of our business plan in Lake Minchumina is to develop tourism and other 

economic development ideas that would result in increased traffic on the route. Based on our 
discussions with some Minchumina residents, this would be a desirable outcome, as long as it 

was coordinated with the local community. 

While we are unable to provide firm estimates, we have assumed in our proposal that we 

will be successful in generating new revenue sources if we are selected as the EAS carrier to 

Minchumina. 

Projected Expenses 

Actual costs as reported on our F2 have continued to increase over the last two years, 

with the exception of hull and liability insurance which is at the bottom of a soft market. Fuel 

costs have been on an upward trend over the past year after declining, and we expect may 

continue to increase as the economy recovers from recession. We have not projected any fuel 

cost increases. Included here are our single engine costs: 

Cessna 

Single 

Engine per 

Blocl< Hour 

Allocated Blocl< Hours 

Direct Expense 

Pilot & Co-pilot 

Fuel & Oil 

Other 

Maintenance 

Depreciation/Rental 

Total Direct Expense 

Indirect Expense 

$135.51 prhr 

Total Operating Cost 

Profit Element of TOC 0.10 

Total Economic Cost 

147.7 

69.54 

51.77 

16.25 

131.41 

80.00 

10271.06 

7646.43 

2400.13 

19409.26 

11816.00 

$51,542.87 

20014.83 

71557.70 

7155.77 

$78,713.47 

Requested Subsidy Calculation 

We propose a fare of $224.00 per person round trip ($112.00 per person one way) to be 

consistent with our fares in similar EAS subsidized markets served by Warbelow's, adjusted for 

the length of flight. This fare would include 40# of allowed baggage at no additional cost. 

Freight rates are proposed at $0.58 per pound. In other subsidized markets served by 

Warbelow's, we have typically not changed fares or freight rates substantially if at all during the 

subsidy period. 
Anecdotal evidence suggests that the current fare structure and schedule has caused Lake 

Minchumina residents to charter rather than using the scheduled service. We therefore propose a 

somewhat lower fare than the incumbent carrier in an attempt to direct traffic onto the scheduled 

flights, which should help to reduce the subsidy need in the long run. 

Given the many uncertainties on the revenue side, we have found it difficult to accurately 

estimate the expected revenue. We therefore offer the following without specific calculations to 

support our revenue numbers since they would simply create a false sense of certainty: 

Option 1. (Current service level) 

Single Engine VFR Aircraft if all 

passengers and mail/freight can be accommodated $600 subsidy per trip 

IFR Aircraft with 9 insured 

seats (Cessna Caravan or Piper PAS 1-350) if load 

or weather dictate $900 subsidy per trip 

This proposal is predicated on a minimum of 26 flights with each aircraft type. 

Total Annual Subsidy request $39,000 

Option 2. (VFR/IFR Flexible increase in frequency as demand warrants) 

Aircraft as required by load and weather, 78 total flights per year, 39 flights with each aircraft 

type. Baseline service of once per week, second flight as demand warrants. This would allow 

for twice a week service up to half the weeks. We would propose that the second flight runs only 

if 3 PEQs or more are scheduled on either the inbound or outbound leg. 

Total Annual Subsidy requestpaid at $1,125 per week $58,500 

Option 3. (High frequency VFR only service) 

Single Engine VFR Aircraft $600 subsidy per trip 

This proposal is predicated on twice weekly service and 104 flights per year 

Total Annual Subsidy request $62,400 

Option 4. (Status quo frequency with all IFR service) 

IFR Aircraft (Cessna Caravan or Piper PA31-350) $900 subsidy per trip 

This proposal is predicated on once per week service and 52 flights per year 

Total Annual Subsidy request $46,800 
We thank you for your consideration of this proposal and we hope to initiate service to 

the Lake Minchumina community for the two year period beginning November, 2010. 

Sincerely, 

Warbelow's Air Ventures, Inc. 

3758 University Avenue South 

Fairbanks, Alaska 

Arthur Warbelow, President 

art@warbelows.com 

(907) 378-7203